Behind in the polls and threatened by a new left-wing party, Germany's ruling Social Democrats (SPD) will propose a wealth tax as part of its platform for early elections scheduled for this fall.
Rich Germans would have to pay 3 percent more in taxes
In a turn to the left from its position in the last two elections, SPD leader Franz Müntefering said Sunday the party if returned to power will impose a 3 percent additional tax on single people earning more than 250,000 euros ($302,000) or married couples earning more than 500,000 euros a year.
"The additional money which we'd gain from the tax hike for the wealthy would be channeled into education, research and innovative technologies," Müntefering told a news conference.
He said the party did not intend to call for an increase in the 42 percent rate of income tax imposed on the highest band of earnings, nor would it change the present rates of value added tax, a form of sales tax common throughout the European Union.
The newsmagazine Der Spiegel said the Social Democrats, if re-elected, would increase value-added tax on consumer goods from 16 to 20 percent to slash the budget deficit. The decision to impose the wealth tax was taken at a meeting of the party leadership, which is in the process of drawing up a campaign manifesto.
Whichever party wins the election will have to reign in Germany's budget deficit, which has exceeded the three percent of GDP ceiling imposed on all countries within the 12-nation European single currency zone.
SPD support crumbing
Confronted with mounting criticism that Chancellor Gerhard Schröder's government has let the more affluent off the hook while implementing painful social and economic reforms, SPD leaders hope a turn to the left can stabilize the party's crumbling support.
Opposition leaders are calling the SPD's wealth tax drive populist, as it only represents a helpless effort to keep potential voters from backing a new leftist alliance which according to latest surveys already stands to garner some 9 percent of the likely vote in September.
According to Kurt Beck, premier of the German state of Rhineland-Palatinate, the SPD leadership also agreed to raise the welfare and unemployment benefits for people in eastern Germany to the same level of that in the west of the country. The difference is only a slight one due to regional differences in the cost of living, but the measure would be popular with eastern voters.
The Social Democrats could also likely make the fight for a minimum wage a central theme in its election manifesto.
"We need a minimum wage solution which will ensure that people will be able to actually live on what they take home," Müntefering said. "We want workers to know that they'll not be exposed to free falling, concerning their earnings in future."
German Chancellor Gerhard Schröder
On his return from Washington this week, Schröder was to inform the ruling coalition of his plans for a confidence vote Friday in the Bundestag, the lower house of parliament. The vote is intended to clear the way for elections a year ahead of schedule.
Schröder called for new elections in May after the Social Democrats lost heavily in a regional election in their former stronghold of North Rhine-Westphalia, as core SPD voters were put off by the government's economic reforms.
According to the latest polls, the Social Democrats are likely to get between 26 and 29 percent in a general election, compared to 45 and 49 percent for the conservative Christian Democrats.