the German people. “Krosigk has again submitted his plan for tax reform,” he wrote. “His draft is too inequitable for me. It’s based mainly on excise taxes. Income taxes, on the other hand, aren’t given any consideration. But excise taxes almost exclusively affect the broad masses and for that reason are very unpopular. They represent a grave injustice that we cannot afford at the present juncture.” 99
Tax Rigor for the Bourgeoisie
The extreme populism of Nazi Germany’s wartime tax policies is underscored by the government’s readiness to tax business and the country’s wealthy. Under the requirements of the KWVO, German companies were compelled as of September 1939 to hand over all additional war-related profits to the state. Various loopholes, though, basically rendered these statutes ineffective until 1941, as evidenced by the fact that most companies did not need to apply for loans to finance war-related expansions of their production capacity. The Nazi leadership realized it had to act quickly if it hoped to collect the lost revenues.
On January 1, 1941, responsibility for enforcing the KWVO’s provisions on corporate taxation was shifted from the Price Control Commissioner’s Office to the Finance Ministry. Administrators there drastically reduced the exemptions that companies were allowed to claim in calculating their profits. The goal was to achieve “more thorough taxation of so-called anonymous capital [a pejorative term for investment funds] and of the tremendously increased income occasioned by the war.” The change had its desired effect—the number of companies applying for credit shot up in 1942.
The economics division of the Reichsbank noticed the growing demand for loans and traced it to the “increasing appropriation of wartime profits.” In another blow to businesses, the Wehrmacht reduced its advance payments for armaments and increasingly took its time settling its bills. 100 The effect was gradual. Wartime profits, which had reached 750 million reichsmarks in the fiscal year 1941–42 and 1.3 billion in 1942–43, declined only a few percentage points the following year. 101 In response to isolated complaints from manufacturers about overtaxation, the government set a cap for individual companies of 8 percent of total corporate income in 1943. 102
Businesses suffered more serious effects from the wartime surcharge on corporate taxes instituted in mid-1941. Applying to all corporations with annual returns of more than 50,000 reichsmarks, the surcharge effectively raised the tax on profits, which had already been hiked to 40 percent before the war, to 50 percent. 103 On January 1, 1942, the corporate tax on businesses earning more than 500,000 reichsmarks was raised again, to 55 percent, 104 resulting immediately in a “drastic reduction in business incomes.” 105 Thanks to the hikes in corporate taxes, the Reich increased its revenues in the three fiscal years between 194land 1944 by more than 4 billion marks. 106
Many business leaders had had enough. The owner of J. F. Lehmann, a medium-sized publishing house specializing in medical textbooks and treatises on German imperialism and race politics, complained in 1942: “Doing more business is a double-edged sword. Ultimately it decreases your earnings since all profits in excess of peacetime levels have to be appropriated and the warehouses gradually become empty.” 107 In 1942, a Berlin hotel owner and wine wholesaler named Lorenz Adlon was paying taxes equivalent to 40 percent not of his firm’s profits but of its annual turnover of 5.7 million reichsmarks. 108
Between September 1939 and March 1942, the Reich recorded some 12 billion marks in revenue from war taxes of various kinds. Only the additional duties on tobacco, spirits, and beer, which earned the state 2.5 billion marks, affected the wallets of the majority of Germans. A further quarter of a billion marks came from the temporary suspension of
Tax Rigor for the Bourgeoisie
The extreme populism of Nazi Germany’s wartime tax policies is underscored by the government’s readiness to tax business and the country’s wealthy. Under the requirements of the KWVO, German companies were compelled as of September 1939 to hand over all additional war-related profits to the state. Various loopholes, though, basically rendered these statutes ineffective until 1941, as evidenced by the fact that most companies did not need to apply for loans to finance war-related expansions of their production capacity. The Nazi leadership realized it had to act quickly if it hoped to collect the lost revenues.
On January 1, 1941, responsibility for enforcing the KWVO’s provisions on corporate taxation was shifted from the Price Control Commissioner’s Office to the Finance Ministry. Administrators there drastically reduced the exemptions that companies were allowed to claim in calculating their profits. The goal was to achieve “more thorough taxation of so-called anonymous capital [a pejorative term for investment funds] and of the tremendously increased income occasioned by the war.” The change had its desired effect—the number of companies applying for credit shot up in 1942.
The economics division of the Reichsbank noticed the growing demand for loans and traced it to the “increasing appropriation of wartime profits.” In another blow to businesses, the Wehrmacht reduced its advance payments for armaments and increasingly took its time settling its bills. 100 The effect was gradual. Wartime profits, which had reached 750 million reichsmarks in the fiscal year 1941–42 and 1.3 billion in 1942–43, declined only a few percentage points the following year. 101 In response to isolated complaints from manufacturers about overtaxation, the government set a cap for individual companies of 8 percent of total corporate income in 1943. 102
Businesses suffered more serious effects from the wartime surcharge on corporate taxes instituted in mid-1941. Applying to all corporations with annual returns of more than 50,000 reichsmarks, the surcharge effectively raised the tax on profits, which had already been hiked to 40 percent before the war, to 50 percent. 103 On January 1, 1942, the corporate tax on businesses earning more than 500,000 reichsmarks was raised again, to 55 percent, 104 resulting immediately in a “drastic reduction in business incomes.” 105 Thanks to the hikes in corporate taxes, the Reich increased its revenues in the three fiscal years between 194land 1944 by more than 4 billion marks. 106
Many business leaders had had enough. The owner of J. F. Lehmann, a medium-sized publishing house specializing in medical textbooks and treatises on German imperialism and race politics, complained in 1942: “Doing more business is a double-edged sword. Ultimately it decreases your earnings since all profits in excess of peacetime levels have to be appropriated and the warehouses gradually become empty.” 107 In 1942, a Berlin hotel owner and wine wholesaler named Lorenz Adlon was paying taxes equivalent to 40 percent not of his firm’s profits but of its annual turnover of 5.7 million reichsmarks. 108
Between September 1939 and March 1942, the Reich recorded some 12 billion marks in revenue from war taxes of various kinds. Only the additional duties on tobacco, spirits, and beer, which earned the state 2.5 billion marks, affected the wallets of the majority of Germans. A further quarter of a billion marks came from the temporary suspension of
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