Federal Finance Minister Christian Lindner wants to relieve society’s middle class with tax plans to offset inflation. That said the FDP politician on Wednesday in Berlin. 48 million people would benefit. The average relief would be 192 euros. Lindner spoke of a tax cut of more than ten billion euros.
Above all, the finance minister wants to compensate for the cold progression. This is a type of creeping tax hike, where salary increases are consumed by inflation but still result in higher taxes. Higher taxes then apply, although purchasing power does not increase in real terms.
Lindner spoke of a “tax increase by default” that he wanted to avoid. In addition to an adjustment of the reference values in the income tax rate, the Minister of Finance plans to increase the family allowance and family allowance. “It’s not about lightening the burden, it’s about letting go of the burden,” Lindner said. He was also in favor of the fact that “strong shoulders should carry more than narrow shoulders.” However, the cold progression will also “put a strain on people whose shoulders haven’t gotten any wider.”
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The project is controversial in the traffic light coalition, the SPD and the Greens are calling for targeted help for low-income people. However, Lindner warned that additional tax burdens “are not fair in the current fragile situation and would also be dangerous for economic development.”
Chancellor Olaf Scholz (SPD) expressed “fundamental goodwill” for Lindner’s tax plans. A government spokesman said on Wednesday in Berlin. He made it clear that the plans should be seen as part of a larger overall concept that must be developed in the coming weeks in light of huge cost increases, for example for energy.
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The department’s vote is starting now, the spokesperson said. The concept will be developed in such a way that it finds the necessary support from the cabinet. He referred to Scholz’s statements that citizens should not be left alone with rising prices. In his previous role as finance minister, Scholz corrected the cold progression twice.
SPD mixed tones
SPD President Lars Klingbeil described to SPIEGEL as “certain that Finance Minister Lindner is constructively participating in the relief debate with his proposals”. . “This could also include tax breaks,” Klingbeil told the news magazine, even though “the highest earners in our country” shouldn’t be the focus. Lindner’s suggestions are “a contribution to an overall package that must now be released quickly”.
Other Social Democrats are more critical of Lindner’s relief proposals. “Another strong boost of relief to the midst of society is right and necessary, but it should primarily target people with small and middle incomes,” said SPD parliamentary group vice president Achim Post. Lindner’s proposals “need to improve” from a social justice perspective.
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Post also emphasized that a complete dismantling of the so-called cold progression, especially in the current phase of high inflation, would be “extremely expensive and anything but targeted”, as high incomes would particularly strongly benefit from it. “Sticking to the current wealth tax rate could only partially dampen that effect,” he said, alluding to the FDP’s resistance to tax increases. “The proposed increases in the basic allowance and in the family allowance are in the right direction, but they are not enough,” added the SPD financial politician.
He suggested direct payments as an alternative, with which small and medium-sized incomes could be alleviated in a targeted way. However, it is clear that the traffic light coalition of the SPD, Greens and FDP will face further relief. “However, there is a need for further discussion of accurate and fair design.”
Greens: Socially unbalanced plans
The Greens in the Bundestag had previously criticized the plans as socially unbalanced. “High-income and high-income groups would be paid more than three times as much as low-income people, who really need relief more urgently,” said parliamentary group leader Andreas Audretsch. In addition, people on very low incomes would not be relieved because they did not pay income tax below the basic allowance.
Financial policy spokeswoman Katharina Beck made a similar statement. “It would be the other way around: strong shoulders would have to carry more than low-income ones and would not feel disproportionately relieved,” she told the Germany editorial network.
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The bill provides that the tax basic allowance from the current 10,347 euros to 10,632 euros next year and 10,932 euros in 2024. The maximum tax rate, which currently applies to taxable income of 58,597 euros, will only start at 61,972 euros next year and 63,521 euros a year later.
This one alimony for the first two children in 2023 will increase by eight euros to 227 euros. For the third child, the parents receive another two euros, then also 227 euros. For the fourth child stays at 250 euros. The following year, the family allowance for the first three children increases again by six euros.
Indeed, Lindner’s plans have a larger percentage effect on low-income people, but in absolute numbers high-income people benefit most clearly. A taxpayer with taxable income of €20,000 is exempt from €115. With an income of 60,000 euros, the relief according to data from the Ministry of Finance is already 471 euros. With even higher yields, they remain stable at 479 euros and do not rise any further.
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