Federal Finance Minister Lindner would like to relieve the German tax burden in view of the high inflation. However, there has been strong criticism from the SPD and the Greens. Accordingly, top earners would be better off than poorer ones.
Federal Finance Minister Christian Lindner (FDP) has announced tax relief for around 48 million citizens in Germany in view of the currently high inflation. “Pensioners, employees subject to social security contributions, the self-employed: people are affected across the board,” said the FDP politician on Monday in Berlin. Only for people with top incomes should there be no additional relief.
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Tax relief should amount to more than ten billion euros
According to Lindner, the planned “Inflation Compensation Act” provides tax relief totaling more than ten billion euros. “People are worried about inflation,” Lindner said. Due to the rising prices for gas and food as a result of the Ukraine war, one is in a situation where action must be taken. “Everyday life has become much more expensive for many people,” explained the economics minister, referring to the inflation rate, which remained at over seven percent in July. At the same time, the economic prospects for Germany are more fragile, as the economic situation is increasingly deteriorating.
“So we’re in a situation where action has to be taken,”
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like Lindner. Compensating for cold progression is therefore a constitutional obligation. Not doing so “would not only be unfair” but would also be “detrimental to our country”. The so-called cold progression threatens many people not only with a “secret tax increase”. Purchasing power would also decrease, which in turn would have fatal consequences for the already badly hit economy.
The term cold progression describes the effect when salary increases are eaten up by inflation, but still result in the employee slipping into a higher tax rate and ultimately having less money in their pockets in relation to purchasing power.
In order to absorb the consequences of inflation, according to the plans of the Ministry of Economic Affairs, the basic allowance is to be increased from the current 10,347 euros to 10,632 euros in the coming year and to 10,932 euros in 2024. It is also planned to return the Treasury’s inflation gains from this year and to increase child benefit and the associated child allowance. In addition, the draft law stipulates that the top tax rate of 42 percent will only be levied from a taxable income of 61,972 euros in the coming year.
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However, Lindner deliberately does not want to touch the even higher tax rate for the wealthy of 45 percent, because he does not believe that additional relief is necessary in this income bracket. In doing so, emphasized the Economics Minister, he was acting differently from his predecessor, today’s Federal Chancellor Olaf Scholz. In his reform, on the other hand, he also relieved the burden on the richest of the population.
SPD and Greens criticize tax plans
However, the SPD and the Greens are critical of the finance minister’s plans. “Another strong relief stimulus to the middle of society is right and necessary, but should primarily target people with small and medium-sized incomes,” criticized the vice-chairman of the SPD parliamentary group, Achim Post, to the news agency Reuters.
“The relief proposals from Federal Finance Minister Lindner still need to be improved from this aspect of social justice.”
According to the Vice-Chairman of the Greens, Andreas Audretsch, Lindner’s tax plans would primarily benefit top earners instead of the middle of society.
“Tax cuts in the billions, from which top earners benefit three times as much as people on low incomes, ignore reality.”
People with small and middle incomes should now be relieved.
In percentage terms, low earners will be relieved by the tax reform to a much greater extent than top earners – in reality, however, it is exactly the opposite. A low earner with a taxable income of 20,000 euros, for example, only has to pay around 115 euros less in taxes in the coming year. A top earner with a salary of 60,000 euros, on the other hand, saves 471 euros in taxes and thus receives a higher tax relief than the low earner.
When asked about the grievance, Linder simply replied:
“I think that fairness includes, on the one hand, seeing those who need solidarity and receive it from us. On the other hand, those who give a lot of the results of their creativity should not be forgotten in order to promote social peace in our country, to keep the state able to act.”
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