Debate Rekindled in Germany Over Wealth Tax Reintroduction Amid Economic Growth Concerns

On February 6, 2026, the Left Party (Linke) in Germany presented a study advocating for the reintroduction of the wealth tax (Vermögenssteuer), suggesting it could generate substantial fiscal revenue while promoting social fairness. The study, commissioned from the German Institute for Economic Research (DIW), estimates that a renewed wealth tax could bring in approximately 147 billion annually. It targets mainly the top 1% of wealthy individuals who hold assets exceeding 2.3 million, with a proposed progressive tax rate starting at 1% and climbing to 5%, potentially reaching 12% for assets above 1 billion.

However, the study and economists caution that this tax carries notable economic risks. Stefan Bach, lead author, emphasized that imposing substantial wealth taxes might provoke investment reluctance, encourage wealthy citizens to relocate abroad, and facilitate tax avoidance through loopholes. Such reactions could dilute anticipated tax revenues and weaken Germany's economic competitiveness and innovation, particularly amid ongoing economic stagnation and challenges to the nation's export-driven industrial model.

This discussion unfolds against a backdrop of cautiously optimistic economic indicators. Recent reports show that German industry orders increased by 7.8% in December 2025, marking the fourth consecutive month of growth, with the metal and machinery sectors experiencing substantial order surges. Despite these positive signals, leading economists like Veronika Grimm warn that without necessary political reforms to reign in state spending and enhance fiscal sustainability, growth gains may be fragile. Grimm foresees that by 2029, state revenues may only suffice to cover defense, interest, and social expenses, pushing other spending onto new debt.

Chancellor Friedrich Merz's government has faced criticism for delaying vital reforms, with Rainer Dulger, president of the Employers' Association, highlighting the negative impact of populist measures on economic vitality and calling instead for tax cuts and reduced social charges to stimulate work incentives and growth.

The history of the wealth tax in Germany is notable; it has not been levied since 1997 following a constitutional court ruling. The Left Party proposes reintroducing it with personal exemptions of 1 million and 5 million for corporate assets, framing the tax not as punitive but as a means to improve fairness in distribution of fiscal responsibilities.

As this debate advances, the balance between fiscal needs and economic competitiveness remains central. The proposed wealth tax could provide significant additional revenue for Germany, but concerns about economic repercussions and the government's reform agenda pose challenges that will shape the policy's future viability.