Members of the Free Democratic Party (FDP) are calling for the abolition of the solidarity surcharge, arguing that its purpose has ended with the completion of East Germany’s reconstruction. As the Federal Constitutional Court reviews the legality of the surcharge, which now primarily affects high earners, legal experts question its ongoing necessity. Chancellor Olaf Scholz supports partial removal, while potential abolition could pose budgetary challenges for the incoming government, with estimates of a significant revenue shortfall.
FDP Pushes for the Elimination of the Solidarity Surcharge
Members of the Free Democratic Party (FDP) are advocating for the complete removal of the solidarity surcharge, arguing that the mission of ‘reconstruction of the East’ has reached its conclusion. The Federal Constitutional Court is currently deliberating on this matter, which could have significant implications for the incoming government.
This topic is pivotal for the FDP, as they seek to abolish the solidarity surcharge entirely. Today, six FDP representatives, including party leader Christian Dürr, are presenting their case against the Soli at the Federal Constitutional Court in Karlsruhe. They contend that the continued collection of the Soli is unconstitutional.
The History and Current Context of the Solidarity Surcharge
The solidarity surcharge was established in 1995 to support the costs associated with German reunification and the subsequent rebuilding of Eastern Germany. Initially, it was a requirement for all taxpayers. The federal government at the time emphasized the need for a collective financial contribution from all citizens to achieve the completion of German unity.
However, significant changes occurred in 2021, limiting the surcharge to high-income earners—those making approximately 85,000 euros annually—and certain businesses. Most taxpayers were exempted from this levy by the previous Grand Coalition.
FDP members argue that since the Solidarity Pact II has ended, the rationale for the solidarity surcharge has also diminished. They assert that the current structure, where only wealthy individuals and companies are taxed, constitutes a ‘hidden tax on the rich.’
Legal experts, including finance and tax law professor Gregor Kirchhof from the University of Augsburg, question whether the financial burdens of reunification still warrant the surcharge’s existence. He highlights that the court must consider if the special financial needs arising from reunification persist and whether, after 30 years, this levy can still be justified as temporary.
Another critical aspect for the court to evaluate revolves around the principle of equal treatment, as 90% of taxpayers are currently exempt from the Soli. This exemption was initially implemented by the Grand Coalition for social equity reasons.
Chancellor Olaf Scholz supports a partial abolition of the solidarity surcharge, asserting that the federal budget can accommodate this change. Meanwhile, the Federal Fiscal Court in Munich has also assessed these arguments and ruled that the Soli remains constitutional for now. The court noted that the legislature holds considerable discretion to impose such a supplementary tax.
Despite this ruling, the Fiscal Court acknowledged that reunification is a long-term challenge and emphasized the need for legislative review after three decades to determine if the surcharge is still appropriate. Professor Kirchhof expresses skepticism about the continued justification for collecting the Soli at this stage.
If the Federal Constitutional Court decides to abolish the solidarity surcharge, it could create substantial challenges for the next federal government, even if they retain the existing Soli revenues. The likely outcome would be that these funds would remain allocated to previous budgets, complicating any attempts to adjust financial plans. Kirchhof estimates that a ruling could result in a shortfall of around 12 billion euros for the year 2025, intensifying the already strained budgetary landscape. A decision from the court is anticipated in the coming months.