Finance Minister Christian Lindner wants to relieve taxpayers by around ten billion euros. The sum comes in addition to the relief package already approved by the federal government in the amount of around 30 billion euros. However, the discussion about how the state should help consumers in view of the sometimes explosively rising prices is not over. Numerous other proposals and demands are already on the table. ntv.de explains the most important of them and their advantages and disadvantages.
At first glance, the easiest way to limit inflation would be to simply set maximum prices for important products such as electricity, fuel or gas by the state. Such proposals, however, regularly make economists throw up their hands over their heads. This is because these goods are often no longer offered in sufficient quantities. Many petroleum companies have stopped importing petrol to Hungary since the government there set a maximum price far below the level in other countries. In other cases, the state or, as in France, with the energy supplier EdF, a state-owned company, pays the difference between the market price and the maximum price set for consumers. On the one hand, this leads to high costs for the taxpayer and, on the other hand, the steering effect of the price is completely eliminated. Consumers are not saving as much energy as they would if they had to pay the market price and as scarcity necessitated.
As an alternative, economists have suggested setting a price cap only for minimal basic needs. For each additional kilowatt hour of electricity or gas, the high market price is due. This encourages savings and effectively relieves consumers. However, this type of price cap can only be easily implemented for goods such as electricity and gas, which a household can only obtain from one supplier at a time. In the case of goods that you buy in a shop or fuel at the gas station, such a regulation would involve considerable bureaucracy.
The temporary reduction in the energy tax on petrol and diesel and above all the 9-euro ticket are making an effective contribution to curbing inflation. According to the study by the German Economic Institute, without these measures the inflation rate would still be around two percentage points higher than at present. Nevertheless, both regulations are controversial and an extension beyond September 1 is currently not planned. Because both measures are very expensive with a total of several billion euros for the planned three-month period alone. Above all, the so-called tank discount is considered a less targeted measure, since well-off drivers benefit disproportionately from it. In addition, it at least dampens the savings incentive of high prices.
The 9-euro ticket is considered to be more effective, since local public transport is used more by low-income consumers who are particularly burdened by inflation. However, it has been criticized for creating enormous demand for public transport without generating additional revenue to expand service accordingly. A comparable 29-euro ticket for local transport is being discussed as a possible follow-up arrangement. The Association of German Transport Companies proposes a long-term, nationwide monthly ticket for 69 euros.
With the energy money in the first relief package, the federal government has already initiated a direct payment to some consumers. The 300 euros gross per employee will probably have to be increased in view of the additional costs of sometimes several thousand euros per household for heating alone. From an economic point of view, direct payments are considered to be very efficient compared to price controls, tax reductions or subsidies. Since the energy money is subject to income tax, higher earners benefit less than low-income workers. In order to provide even more targeted relief for poorer consumers, the payments could also be staggered according to income.
From a bureaucratic point of view, however, direct payments from the state are a challenge. As part of the first relief package, employees receive the money from their employees and in turn from the tax office, benefit recipients with their respective social benefits, parents for their children via the child benefit office. Retirees get nothing. Since not everyone pays taxes or receives social benefits, there is no uniform way in Germany for the federal government to simply pay out money to residents.
In addition to electricity and heating, basic foods in particular have become significantly more expensive in recent months. From social organizations to the left to the CSU, many are therefore demanding that the state should curb the price increase with a tax cut - similar to the tank discount. The proposals range from a tax cut on healthy basic foods such as fruit and vegetables in return for a tax increase on environmentally harmful products such as meat, to a general waiver of the seven percent VAT on all food. The tax losses for this could amount to up to 13 billion euros, depending on the structure. One argument in favor of such a tax cut is that poorer consumers spend a larger proportion of their budget on food than wealthy people and are therefore more heavily burdened by inflation in this area as well.
Still, spending on food and drink is much lower than energy and housing, making relief in the latter areas even more important. In the event of a reduction in VAT, it would also be questionable whether and how much of it the manufacturers and dealers would pass on to the customers at all. Analysts of the temporary VAT reduction of two percent during the Corona crisis came to the conclusion that retailers only passed on 60 to 80 percent of the tax savings to consumers.
Government circles themselves came up with the idea of promoting one-off payments from employers to their employees to compensate for inflation by means of a tax exemption. The employees would get a lot more than with a normal salary increase. At the same time, according to the justification for the proposal, companies would not be burdened with any permanent additional costs and inflation expectations would therefore be kept low. This should prevent a so-called wage-price spiral.
However, the proposal has met with criticism, especially from the trade unions. The additional burden of inflation is also permanent, so wages would have to rise accordingly. Since one-time payments are usually based on the amount of the salary, high earners would benefit disproportionately from this tax relief, but large parts of the population from the self-employed to social security recipients to pensioners would not at all.
