Tax Hikes Begin Monday to Pay for Making Two Germanys into One
Jun. 30, 1991
FRANKFURT, Germany (AP) _ Whopping tax increases to finance the German unification go into effect Monday. Now, higher income, gas and cigarette taxes will help pay for the cost of making the two Germanys one.
Since Germany reunified on Oct. 3, the economic brunt of unification has been felt in eastern Germany. Unemployment in the five new states surged as former Communist-controlled companies closed under the weight of free-market competition.
Now western Germans will also feel the pinch - starting Monday, income taxes will jump 7.5 percent and the gasoline tax will rise 37 percent, making a gallon of regular cost about $3.30.
The price of unification continues to rise. A recent government estimate said costs, including former East German debts and privatization, may reach $176 billion by 1993.
The Germans also have decided to relocate the seat of government from Bonn back to its historic home in Berlin.
Finance Minister Theo Waigel has estimated that will add $17 billion to $52 billion to the bill, according to the Frankfurter Rundschau newspaper.
Chancellor Helmut Kohl assured voters last year that unification could be accomplished without increasing taxes. But he later admitted he miscalculated, and this year the government passed the tax increases that take effect Monday.
While Kohl's popularity has dropped since the July 1 tax rates were announced, prosperous western Germans, who will be paying the majority of the increases, have shown little more than cursory annoyance with the new law.
''What did you expect, the money for unification had to come from somewhere,'' said Frankfurt restaurant owner Peter Blisch.
The reality of how hard the new taxes will hit the pocketbook will be most evident at the gas pump.
Tax on unleaded regular, for instance, will drive the price of a gallon of unleaded regular gasoline to about $3.34 a gallon, from $2.88.
The increase means it will cost about $7 more to fill the 14 1/2 gallon tank of a Volkswagen Golf.
During the last week of June, gasoline companies placed advertisements in papers and posted signs advising customers how many days were left to fill their tanks at the old prices.
''Only 2 Days for Full Power at Old Price,'' the ads read, advising that service stations were staying open longer over the weekend to meet the expected surge in gasoline buying in this auto society.
Personal and corporate taxes also increase 7.5 percent for one year. They will return to present levels July 1, 1992.
That means an average German single-income family with two children earning $31,962 per year will have to pay $3,187 in income taxes after exemptions, an increase of $222 over last year.
Cigarettes will cost more, raising the price of a pack to $2.59 from $2.47.
The costs of mailing a package and making a telephone call are also going up.
Overall, the government expects to raise an additional $27 billion by the end of 1992 with the various increases, said Christian Kastrop, a Finance Ministry spokesman in Bonn.