Merkel plays it safe on tax breaks for gay couples

Tomorrow’s news today: in early summer, judges at Germany’s highest court in Karlsruhe will dismiss as unconstitutional 55-year-old tax privileges for married couples.

After the verdict is announced, German chancellor Angela Merkel will welcome the ruling and promise legislation. Just not too soon.

With a general election looming in September, the Karlsruhe ruling creates a taxing dilemma for the German leader. At stake is the “special protection of the state” extended to marriage and the family under article six of Germany’s post-war Basic Law.

Since 1958 this has been reflected in “spousal splitting”, a tax code rule allowing married couples to pool their incomes and then halve them for tax purposes. The greater a couple’s income difference, the greater the combined tax saving.

This has come under pressure in recent years, particularly since Germany introduced civil partnerships for same-sex couples in 2001. Gay couples enjoy many of the rights and privileges of married couples, but not in adoption and tax law.

But in a series of rulings the Karlsruhe court has dismissed as unconstitutional one legal restriction after another for gay couples. Last month the court extended additional adoption laws to gay couples. The “spousal split” tax breaks for married couples are next for the chop.

“I’m no fan of the spousal split but, for me, this case is about the principle of equal treatment before the law,” said accountant Stephan Wolsdorfer, one half of the couple whose complaint Karlsruhe is considering.

Inopportune time

The ruling will come at an inopportune time for Angela Merkel. Since becoming leader of the Christian Democratic Union in 2000, the pragmatic leader has nudged the traditionally right-wing party into the political centre, scooping up floating voters and binning many cornerstones of party tradition in the process.

Military service has been abolished, nuclear energy mothballed and, in their stead, the CDU has embraced previously unthinkable positions like support for a quasi-minimum wage and childcare for all.

Six years ago the CDU’s new political programme redefined its view of family as “where parents take long-term responsibility for children”. Moving from theory to practice, however, is proving to be a political can of worms.

Critics of the “spousal split” say it subsidises a model of life from 1958 – one breadwinner and married life with children – and has little to do with today’s reality where two-thirds of German women work and a third of children are born out of wedlock. In modern Germany, say critics of the status quo, marriage is a subset rather than a synonym for family.

“The annoying thing in the debate is how family and marriage are mixed up and mentioned in the same breath though they are two different things,” said Wolsdorfer.

Now this hotly fought debate has reached the CDU. Alarmed traditionalists see marriage under attack, its special constitutional protection being undermined.

Reformers say they want to give privileged status to all family forms and reform tax privileges to reflect their original purpose: subsidising the expense of raising children, regardless of parents’ marital status or sexual orientation.

While Merkel considered whether to legislate or procrastinate, her general secretary was out flying kites in favour of tax reform.

Even finance minister Wolfgang Schäuble, at 70 the elder statesman in cabinet, said it was “sometimes necessary” for political parties to stay relevant by “taking note of changed realities”.

Federal family and labour ministers, Christina Schröder and Ursula von der Leyen, have come out in favour of following the French model – where tax breaks depend on the number of children in a family, not a marriage certificate.

But opinion polls send a dangerously mixed message to the German leader: while 70 per cent of Germans are in favour of extending tax breaks to gay couples – at a cost of €30 million annually – another poll shows 80 per cent of CDU voters are opposed. And so extending the “spousal split” tax breaks to gay couples – or all families – could have unpredictable political consequences.

‘Highly political’

“It is a highly political matter of who would have more or less in their pocket after such a reform,” said Prof Markus Heintzen, professor of law at the Free University in Berlin.

“And, when you look at the typical CDU voter, it’s likely that a reform as required would leave them having to pay more tax.”

After a heated two-hour meeting of CDU executives on Monday, Merkel decided to play it safe and hold off on doing anything.

For Michael Spreng, a political spin-doctor, the tax debate has exposed a CDU identity crisis that, for years, was masked by Merkel’s aura of power.

“In this case, she has come up against the limits of modernisation, which is why she’s had to row back,” said Spreng to German radio.

Pragmatic reforms might attract urban floating voters to the CDU come September, but could also repel many socially conservative CDU voters. Of particular concern is Bavaria where Merkel’s conservative Bavarian allies, the CSU, this year face dual state and federal elections.

According to Spreng, the CDU leader is anxious not to alienate conservatives to break away to form a new party.

“The question now,” he said, “is how long Dr Merkel will succeed in modernising the party and keep conservatives on board.” While Merkel hopes to put off her taxing decision until after election day, the opposition Social Democrats (SPD) and Greens have other plans.

Debate kept alive

Later this month, they will use their new majority in the upper house, the Bundesrat, to table legislation opening civil marriage in Germany to gay couples later this month. It is unlikely to become law, but it will keep alive a debate Merkel desperately wants to kill off.

Stephan Wolsdorfer and his partner Hasso are watching the political debate in Berlin with interest, but little surprise.

“Merkel is staying true to herself, she has no convictions and she doesn’t act unless forced to,” said Wolsdorfer. “She has no interest in a fight with her own party, that’s clear, but in the coming weeks, we’ll have our ruling.”