Tax  free package: Lindner wants inflationary compensation for midfield

Tax free package: Lindner wants inflationary compensation for midfield

Status: 08/10/2022 11:35

Finance Minister Lindner wants to relieve society’s middle class with tax plans to offset inflation. 48 million people would benefit, he said. Key points are a higher base allowance and more child benefit.

The Federal Minister of Finance, Christian Lindner, presented the rationale for an “Inflation Compensation Act”. According to Lindner, if the law were passed, 48 million people would benefit. The average relief would be 192 euros.

With fiscal plans to offset inflation, the finance minister wants to relieve the middle class. “People are worried about inflation,” Lindner said. Given the fear of rising gas and food prices, it finds itself in a situation where action is needed.

Finance Minister Lindner introduces “Inflation Compensation Act”.

tagesschau24 10:00 am, 10.8.2022

Lindner wants to compensate for the progression of the cold

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.

“We are in a situation where measures must be taken”

The project is controversial in the traffic light coalition. Instead, 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.” Having already received criticism from many quarters before, Lindner justified the tax cut he was planning as an imperative of justice. “We are in a situation where action must be taken,” Lindner said.

An increase in the base allowance for income tax, changes in the tax rate and increases in child benefit and family allowance are foreseen. For all people whose annual income is less than 62,000 euros, the relieving effect must exceed the additional burden of the progression of the cold.

“It’s not about lightening the burden, it’s about letting go of the burden,” Lindner said. He was also in favor of “strong shoulders carrying more than narrow shoulders”. The cold progression would also “put a strain on people whose shoulders haven’t gotten wider.”

SPD faction deputy: proposals “need to be improved”

“Another strong stimulus of relief to the middle of society is right and necessary, but it should mainly target people with small and middle income,” the vice chairman of the SPD parliamentary group, Achim Post, told the Portal news agency. The Minister of Finance’s proposals still need to be improved in this aspect of social justice.

Post also stressed that a complete dismantling of the so-called cold progression would be “extremely expensive and anything but targeted”, especially in the current phase of high inflation, as high incomes would particularly benefit from it. “The proposed increases in the basic allowance and child allowance are in the right direction, but they are not enough,” added the SPD finance politician. High energy and food prices hit mainly small and medium incomes.

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.

Vice Green Group: “Ignore reality”

Green Group vice president Andreas Audretsch said: “Tax cuts in the billions, from which the richest benefit three times as much as the low-income people, ignore reality.” People on small and medium incomes must now be relieved.

Financial policy spokesman for the Left Group in the Bundestag, Christian Görke, called Lindner’s tax plan a “joke”. The poorest 70% of the population would receive almost nothing because they paid almost no income tax. “A reduction, therefore, only helps them minimally. In absolute terms, those who earn the most benefit the most from Lindner’s proposal.”

Union welcomes Lindner’s proposals

Lindner receives Union support for his tax reduction plans. “Mr Lindner’s relief proposals can still be developed, but they are going in the right direction,” economic policy spokeswoman for the CDU/CSU parliamentary group Julia Klöckner told the AFP news agency.

She accused the traffic light coalition of being unable to act on the cold progression issue. “The Greens and the SPD have already contradicted the proposals in advance,” Klöckner said. “In view of rising inflation, citizens finally want relief to be implemented instead of always fresh discussions at traffic lights.” For the federal government, the following should now apply: “Decide rather than argue.”

DGB: “Fiscal concept falls far short”

The German Trade Union Confederation (DGB) rejects the proposals. Lindner’s concept of taxes “is too short,” said Stefan Körzell, a member of the DGB board of the dpa news agency. For sufficient relief for small and medium incomes, the basic subsidy would have to increase to 12,800 euros. “Instead, the highest earners and the rich are benefiting, although they have much less trouble dealing with current price increases,” Körzell criticized.

From the DGB’s perspective, eliminating cold progression alone is not the key to more tax justice, as Körzell pointed out. “Now it would be important to have tax breaks for the general public.” He referred to a DGB concept, which he said would improve the situation of 95% of families. The main concern for funding: “The highest earners and the rich should contribute more to tax revenue,” Körzell said. Lindner does not foresee this.

Instead, the FDP politician’s concept causes “severe revenue deficits” for tax authorities. “A total of 15% of the costs must be borne by already over-indebted municipalities, which must also invest in education, infrastructure and climate protection,” said Körzell. “It doesn’t fit front and back.”

Taxpayers Association: There is no “real relief package”

For the taxpayers’ association, however, Lindner’s plans don’t go far enough. “It is not a real aid package, but only partial compensation for the extremely high burden,” said President Reiner Holznagel. Furthermore, there is not only political will behind it, but above all a legal obligation. After all, income tax deductions for children and adults would have to be adjusted to the price increase by law.