Tax increases pushed the marginal rates up to around 60 percent for individuals and higher for companies. Deductions for shipping caused investors to put hundreds of millions into a losing industry. Payroll tax hikes funding an aging population ran labor costs to the highest in the world. The result has been the worst economic crisis since the birth of the German Republic. The country has lost thousands of jobs.
Taxes are the biggest obstacle to doing business in Germany, according to one consultant.
Last year unemployment hit 10 percent and the country was in its second recession in three years. Now, things are changing as tax reformers are starting to get a hearing. Then, in March, voters in three big states unexpectedly endorsed the idea that government's take from citizens should be limited to one-third of their income. Last week a taxpayer lobby and the civil servants' trade union demanded a slimmer tax structure. While bolder tax cutters draw strength from American models like the flat tax and the Laffer curve, some of the best models for lower tax regimes come from closer to home.