Humanistische Stiftung

In 2002, the Humanistische Stiftung launched a competition on the subject of “the modernization of the income tax law”.

This competition called for a text for the law as well as explanatory notes to it. The first prize was won by Professor Joachim Mitschke (Frankfurt/Main), winner of the second prize was college lecturer Dr. Michael Elicker (Saarbrücken), a working party with Professor Joachim Lang (Cologne) as its spokesperson was awarded the third prize. The fourth prize was shared between Professor Manfred Rose (Heidelberg) and Dr. Hermann Otto Solms (FDP).

As our competition revealed, the current taxation system is one of the reasons for the ailing condition of our economy. It restricts the latter’s ability to finance itself too greatly. The following are possible alternatives to the present system: savings-adjusted, interest rate-adjusted and dual taxation. Savings-adjusted taxation currently seems the most suitable alternative, if it is initially applied only to the incomes of corporate bodies, tradesmen, freelancers, agriculture and forestry. Admittedly this would mean new questions to be addressed, however these would be considerably less weighty than those associated with the current system.

The competition also showed quite clearly that the notion of integrating social transfer into the income tax system should be pursued with great diligence.

The work by Prof. Mitschke (Erneuerung des deutschen Einkommensteuerrechts – Gesetzesentwurf und Begründung (Modernization of the German Income Tax Laws – a Draft Law with Explanation), € 34.80), Dr. Elicker (Entwurf einer proportionalen Netto-Einkommensteuer) (Draft for a Proportional Net Income Tax) and the revised competition entry by Prof. Lang (Kölner Entwurf eines Einkommensteuergesetzes) (Cologne Draft for an Income Tax Law) have been published by Dr. Otto Schmidt Verlag, Cologne. Prof. Lang’s activities are now being sponsored by Stiftung Marktwirtschaft (the Market Economy Foundation). Dr. Solms’ work (Liberale Reform der direkten Steuern) (Liberal Reform of Direct Taxation) has been published by liberal Verlag GmbH, Berlin. The University of Cologne’s Financial Institute (Fuest, C., A. Peichl and T. Schäfer (2005), has recently rebutted the sweeping assertion that downstream corporate taxation could result in uncontrollable shortfalls in tax revenue: Aufkommens-, Beschäftigungs- und Wachstumseffekte einer Steuerreform nach dem Vorschlag von Mitschke (Tax Revenue, Employment and Growth Effects of a Tax Reform Following the Mitschke Proposal) Fifo Reports no. 5. On the contrary, following Joachim Mitschke’s proposed reform for the Federal Republic of Germany, during the introductory phase of downstream taxation a 1.1% growth in the gross national product plus a boost in employment of 370,000 could be generated.

The general question of the compatibility of all these drafts with the basic freedoms agreed upon in the EC and EU treaties remains open. In order to clarify these questions the foundation has launched another competition.