What is a 'Solidarity Tax'
A solidarity tax is a government-imposed tax levied in an attempt to provide funding towards theoretically unifying (or solidifying) projects. The tax acts in conjunction with income taxes and places an additional burden on tax payers, including individuals, sole proprietors and corporations. The solidarity tax is generally calculated based on a percentage of the tax bill. For instance, in Germany, taxpayers must pay an additional 5.5% of their yearly tax bill towards the solidarity tax.
BREAKING DOWN 'Solidarity Tax'
The solidarity tax has been introduced in several nations, most notably Germany, whose solidarity tax was utilized to help rebuild eastern Germany. Since the solidarity tax is intended to be a short-term surcharge or supplementary tax on top of regular income taxes, the long-term German solidarity tax has been under scrutiny for being unconstitutional.