Via-WSJ
BERLIN -- German Chancellor Angela Merkel defended her plan to cut taxes despite the country's soaring budget deficit as she introduced her conservative alliance's manifesto ahead of national elections in September.
Lower incomes taxes would "provide motivation" and encourage economic growth, Ms. Merkel told a conference of her party, the Christian Democratic Union, and its Bavarian sister party, the Christian Social Union.
"It would be wrong not to do what is right and necessary for growth, and so prevent ourselves emerging quickly from this crisis," Ms. Merkel said in her conference speech.
Angela Merkel
The conservative parties' election platform promises tax cuts worth €15 billion ($21 billion), but gives no time frame. The parties plan to cut the lowest income tax rate to 12% from 14% at present, raise the threshold for paying the top income tax rate of 42%, and reduce the degree to which a rising income leads to a progressively higher tax rate.
However, Germany's widening budget deficit has led to expectations the next government might have to plug the budget gap with higher taxes. Some state governors and lawmakers from the Christian Democrats have in recent days suggested raising some sales taxes to increase revenue, a debate Ms. Merkel is struggling to stamp out.
The left-leaning Social Democrats, who govern Germany as part of Ms. Merkel's awkward bipartisan coalition but who are campaigning against her in the election, have mocked the Christian Democrat's tax-cutting promises, saying the money isn't there at a time when Germany is racking up record public debt to tackle its deepest recession in the postwar era.
"When the economy is back on its feet, we must consistently bring down new borrowing," the Social Democrats' Secretary-General Hubertus Heil told German public radio. "There is no room for tax gifts on a broad front," he said.
Ms. Merkel has repeatedly ruled out the possibility of tax increases in the event she wins the election, saying the German economy wouldn't be able to deal with the burden of higher taxes when it is struggling to regain some growth momentum.
But analysts, including the head of the government's council of economic advisers, have predicted the next government may have no choice but to raise taxes.
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