German government dismisses report Schaeuble may raise top income tax to woo left

BERLIN (Reuters) - The German government has dismissed a report that Finance Minister Wolfgang Schaeuble is considering raising the top rate of income tax to help Angela Merkel co-opt the opposition Social Democrats (SPD) in a possible "grand coalition". Weekly news magazine Spiegel reported that Schaeuble had asked experts days after the election to draw up plans on raising the top tax rate - currently at 45 percent on income over 250,000 euros - to between 46 and 48 percent. "Minister Schaeuble has frequently and clearly rejected tax increases. This position has not changed. All other media speculation is unfounded," said a finance ministry spokeswoman. Chancellor Merkel's Christian Democrats (CDU) emerged as the dominant party from last Sunday's election, but her conservatives fell short of a majority, leaving her in search of a new partner among the SPD or Greens. The SPD agreed on Friday to enter exploratory talks on a possible coalition. The CDU had ruled out any tax increases in its election program, whereas the SPD said it planned to raise the tax rate on incomes over 100,000 euros to 49 percent from 42 percent. Merkel is expected to have to make steep concessions to the SPD in order to persuade it to join a coalition. These could include offering it the post of finance minister in her future cabinet. The SPD decided on Friday that it would put any decision on entering a "grand coalition" to a poll of its 472,000 grassroots members. (Reporting by Alexandra Hudson; Editing by Hugh Lawson)