Chancellor Helmut Kohl on Wednesday ruled out seeking a compromise tax cut with his political foes before September elections, saying voters should decide the issue.
Kohl's ambitious proposal for slashing German individual and corporate income taxes, which are among the world's highest, led to a legislative impasse last year that has spilled over into this year's election campaign.
The chancellor touted the plan as a way to spur investment and create jobs in an era of record postwar unemployment and worries about Germany's competitiveness.
But the opposition Social Democrats killed the proposal in parliament's upper house last fall, saying it was too generous to the rich and would create new budget holes.
Kohl's chief aide, Friedrich Bohl, said the German leader was sticking to his plan, which reduces all individual and corporate taxes in several steps.
The Social Democrats have proposed lowering the top and lowest tax brackets by four percentage points each and designing tax reform so that the government actually loses no revenue.
``It is now up to voters to make the decision about the tax reform on Sept. 27,'' when Kohl will stand for a record fifth term in parliamentary elections, Bohl said.
The Social Democrats, known as SPD, reject the government's concept, so ``renewed talks with the SPD make no sense,'' Bohl said in a statement after leaders of Kohl's three-party ruling coalition met in Bonn.
The Social Democrats had urged the government Tuesday to declare whether it was ready to negotiate.
Rudolf Scharping, the party's parliamentary whip, said his side wanted to close tax loopholes and ease the tax burden on families. ``Everything else is up for discussion,'' he said.
The government's $16.5 billion tax cut called for lowering the minimum personal income tax rate to 15 percent from about 26 percent. The highest personal tax rate for incomes of $49,500 or higher would have dropped to 39 percent from 53 percent.
The overhaul would also have simplified Germany's tax code and closed loopholes.
The deadlock makes it unlikely that German income taxes will be lowered this century.
Meanwhile, the value-added tax on sales is rising to 16 percent from 15 percent in April to subsidize the nation's social security system.