Linder impedes the escalation of social security taxes for the financially prosperous
There seems to be a potential conflict emerging within the German federal government between Finance Minister, Christian Lindner, and his Social counterpart, Hubertus Heil. As reported by "Handelsblatt", Lindner is reportedly blocking the proposed increase in contribution assessment ceilings for social insurance, a proposal by Heil. Negotiations are currently underway within the government regarding the issue's future direction, according to the report.
If Heil's plan goes through, higher earners would disproportionately bear the brunt of the additional contributions. The social insurance system, which encompasses pension, unemployment, health, and long-term care insurance, is generally believed to be chronically underfunded in the long term. Heil is reportedly planning to significantly raise the contribution assessment limits, meaning the income thresholds up to which contributions are mandatory, in the following year. Any income surpassing these limits would be exempt from social contributions. Under Heil's plans, high earners might be required to pay up to 1,000 euros more in contributions next year, according to "Handelsblatt". The current contribution ceilings for pension and unemployment insurance stand at around 91,000 euros per year, while health and long-term care insurance have thresholds of roughly 62,000 euros.
The Federal Ministry of Finance allegedly views this increase as contradictory to the tax relief measures stipulated in the traffic light coalition's growth package. According to a quoted note between ministries, "the relieving effects of the growth initiative measures would be negated" if the proposed contribution assessment increase goes through.
The Federal Ministry of Finance declined to comment on the matter upon request. Meanwhile, Lindner stated in the Bundestag on Wednesday that there's a risk that the plans for relief could be redirected into the social insurance system through the proposed contribution assessment limit increase, thus negating the intended purchasing power boost.
If implemented, Heil's plans could lead to an increase in unemployment insurance contributions for high earners. This potential increase in contributions contradicts the tax relief measures outlined in the traffic light coalition's growth package, as per the Federal Ministry of Finance.
