The broken promises: How the state protects the super-rich by Detlef Koch, 7/16/2025

The broken promise of society: How the state protects the super-rich

by Detlef Koch

[This article posted on 7/16/2025 is translated from the German on the Internet, https://www.nachdenkseiten.de/?p=136070.]

The Federal Republic of Germany sees itself as a social market economy, a constitutional state, and a democracy. Its constitution obliges it to ensure equal living conditions and taxation according to ability to pay. But these promises are a mockery of our citizens’ judgment—and not by accident. Behind the façade of regulatory rhetoric, a system has established itself that protects wealth, organizes redistribution to the top, and systematically undermines democratic influence. By Detlef Koch.

We are experiencing a system that serves the interests of a financially powerful minority – not the common good. In its current form, it is not only unjust, but also deeply unconstitutional and destructive to democracy. The AfD will thank us for it! This article reconstructs how small circles of power from business, politics, and the media are exploiting tax law for their own strategic benefit—and how this is destroying a social contract that only ever applied to a few.

1. The legal gutting of the principle of performance

2. The basic idea behind German tax law is simple: those who can afford to pay more should contribute more to the community. This principle of ability to pay forms the basis for the legitimacy of progressive income tax. However, it is precisely at the top of the income distribution scale that this principle has been systematically undermined. The flat-rate withholding tax on capital gains (25 percent) allows multimillionaires to remain below the tax burden of nursing staff, teachers, and engineers with their dividends and speculative gains. At the same time, corporations and holding companies are taxed at effective rates in the single-digit percentage range—a circumstance that neither skilled tradespeople nor middle-income employees can imagine. The circumvention of real estate transfer tax through so-called share deals is particularly drastic: While every private individual pays between 3.5 and 6.5 percent to the tax authorities when buying real estate, large investors buy shares in real estate companies – tax-free. Yes, you heard right – tax-free[1]. The regulation was politically motivated and remained untouched for years despite criticism. The double standard is also evident in inheritance tax law: Large corporate assets can be transferred almost tax-free via so-called exemption rules. The means test, introduced following a ruling by the Federal Constitutional Court, is designed in such a way that even billionaire heirs can easily pass it. The tax state protects dynastic asset transfers[2] – it does not prevent them. If “dynastic wealth transfer” reminds you of feudal times… Yes, that’s exactly how it’s meant to be!

3. Architecture of self-exemption: a tax policy cartel

4. The question of who benefits from this tax policy can be answered empirically and structurally: it benefits the richest 1% of the population – especially the top 0.1%. This group has corporations, international residences, specialized tax firms, asset managers, and political connections. It is in a position to strategically exploit even complex tax regimes or even help shape them. The case of the Family Business Foundation is a prime example of how laws are created in dialogue with those who stand to benefit from them. When the Federal Constitutional Court ruled in 2014 that the exemption of business assets went too far, the reaction was not a change of course, but a targeted adjustment: the foundation had formulated requests for changes at an early stage – and our disloyal representatives delivered. Even internationally known scandals such as Cum-Ex or Cum-Cum were not marginal phenomena, but an expression of an attitude: Tax avoidance is not a stopgap measure, but part of a feudal, ideologically charged self-image that regards public property as spoils to which one is entitled by virtue of one’s status. Legal circumvention goes hand in hand with political circumvention: lobbyists from banks and law firms help draft legislation. Former ministers find themselves on supervisory boards just a few months after leaving office. A separation between the legislative sphere and economic interests exists only on paper, if at all.

5. Lobbying as a technology of power

6. The targeted influence of economic power circles on legislation in Germany is neither a coincidence nor an exception—it is part of a thoroughly rationalized power strategy. Lobbying is organized in foundations, associations, think tanks, and consulting networks. This network is particularly effective in tax policy. Between 2012 and 2017, at least €2.8 million flowed to the CDU, CSU, and FDP from the Family Business Foundation alone. Party donations, expert opinions, meetings at the chancellor’s office—it is an informal complex of proximity that has little to do with democratic negotiation. The political success of these networks is evident not only in the wording of laws, but also in what is not done: Share deals were not prevented for years, the flat-rate tax was not reformed despite constitutional doubts, and the charitable status of economic lobbyist foundations was not questioned. The idea that all this is a matter of technical details is naive, to say the least. Tax policy is power politics – and its design is an expression of social power relations.

7. Classism in its purest form: framing inequality

8. The corresponding power circles are not content with economic dominance – they create the semantic framework in which their feudal privileges appear normal, just, or necessary. The term “high achievers” was deliberately propagated in the 2000s to morally enhance high incomes and wealth. Anyone who wants to tax wealth is considered “envious” or “anti-business.” The Initiative Neue Soziale Marktwirtschaft (INSM), a PR initiative financed by employers’ associations, regularly suggests that higher taxes on capital flight and location weakness. The fact that many of these narratives are empirically untenable is irrelevant—what matters is their discursive function: redistribution is declared a danger, and the preservation of vested rights becomes an achievement. The narrative of the threatened middle class is another building block. Rich family businesses portray themselves as the backbone of society, even though their ownership structures and tax arrangements no longer have anything to do with the traditional middle class. This rhetorical equation obscures

the reality: the fact that around one-third of Germany’s total net wealth is concentrated in the hands of the top 1% is largely ignored in the public debate.

9. A constitutional breach with advance warning – and without consequences

10. This raises not only ethical questions, but also legal ones. The principle of equality (Art. 3 GG), the social welfare state principle (Art. 20 GG), and the principle of ability to pay – all of these have been undermined by the existing tax architecture. The Federal Constitutional Court has repeatedly criticized certain regulations for being too one-sidedly favorable to high net worth individuals. However, there has been no fair response from the legislature – or the correction of the injustice was immediately influenced by the tax beneficiaries themselves. What remained was an understanding of democracy characterized by a disregard for social obligations.Unconstitutionality is accepted if it serves the right people. The legal system appears selective. While social welfare recipients are under general suspicion, tax avoiders are treated as equals. It is a double standard that undermines trust in the rule of law and

drives some people into the arms of fascism.

11. Democracy without the people? When political participation is economically poisoned

12. The economic “elite” not only has more money—it also has more access, more voice, and more influence. Studies show that political decisions in Germany almost exclusively serve the interests of the wealthy rather than those of the majority[4]. When tax law is effectively drafted in dialogue with the richest members of society, parliamentary representation is hollowed out. When the political arena is controlled by party donations, expert opinions, and media cooperation, the spectrum of democratic decision-making is reduced to almost zero. The normalization of these conditions in the media is particularly alarming. Hans-Werner Sinn and others appear on talk shows as “neutral experts,” while voices critical of capitalism are marginalized or defamed as populist. This creates a hegemony of opinion that delegitimizes calls for reform in advance. Democracy is not damaged by a coup d’état, but destroyed by informal power relations—and all without any observation by the Office for the Protection of the Constitution.

13. Beyond partisanship – Why a new social contract is overdue

14. These conditions are not operational accidents – they are the result of a long-term shift in political economy. They are evidence of elitist power circles that have abandoned the idea of the common good without openly admitting it. The elite believes it can afford to do so – both economically and ethically. But this feudal arrogance is dangerous, because trust in the democratic order is eroding not only among marginalized social groups, but also among the middle class. When justice becomes a sham, when laws primarily serve the wealthy, when political power can be bought, then more is at stake than just fiscal fairness. Then the very idea of democracy is damaged.A radical revision of tax policy is needed—not as a technocratic measure, but as a socio-political signal. Progressive taxation, wealth taxation, the closing of loopholes, solid staffing levels for tax investigation: these are not projects born of envy, but prerequisites for a society in which equality is more than just a word in the constitution. A new social contract is long overdue. One that does not ask how much wealth is possible, but how much concentration of wealth a democracy can tolerate. A social contract that does not abolish property, but clearly defines its limits, and one that claims to make politics for everyone – not just for those who can afford to have a say. The population is still silent, but how long will this injustice be tolerated?

[«1] While private individuals are always subject to the full real estate transfer tax (between 3.5% and 6.5%) when purchasing real estate, large investors use so-called share deals, in which shares in property-owning companies are transferred instead of the land itself. As long as the shareholding remains below 90% (until July 2021: below 95%), no real estate transfer tax is payable. According to the Federal Ministry of Finance, these legal arrangements result in tax losses of up to €1 billion annually. See Federal Ministry of Finance: Interview with State Secretary Sarah Ryglewski on the law against share deals, monthly report October 2021, online: bundesfinanzministerium.de (accessed on July 11, 2025).

[«2] German inheritance tax law grants extensive tax breaks for business assets, which in practice often lead to the virtually tax-free transfer of large family fortunes. According to the ruling of the Federal Constitutional Court of December 17, 2014 (Ref. 1 BvL 21/12), the exemption rules in force at the time violated the principle of equality (Art. 3 (1) GG), in particular because even large corporate assets could remain completely tax-exempt without a means test. Although the law was amended in 2016, key benefits – such as the option exemption – remained in place. According to the Federal Ministry of Finance, the majority of transferred business assets continue to fall within cases eligible for exemption. See Federal Constitutional Court, judgment of December 17, 2014, 1 BvL 21/12; Federal Ministry of Finance: Draft law to adapt the Inheritance Tax and Gift Tax Act to the case law of the Federal Constitutional Court, BT-Drs. 18/5923, p. 34 et seq.

[«3] According to an analysis of the financial reports of the CDU, CSU, and FDP by Finanzwende e.V., between 2012 and 2017, at least €2.8 million from the Family Business Foundation went to these parties (CDU: €1.898 million, CSU: €85,000, FDP: €974,000). These donations come from members of the foundation’s board of trustees or management and prove regular political and financial support. See Finanzwende e.V.: Analysis of party donations from the Family Business Foundation, August 2024, online: Lobbypedia entry “Family Business Foundation – Large donations to the CDU, CSU, and FDP”

[«4] “For the German people”? The unequal responsiveness of the Bundestag – Lea Elsässer · Svenja Hense · Armin Schäfer