Lindner initiates another controversy over traffic light coalition's tax policy with his proposed relief measures.
Minister Lindner discussed the "fairness directive" on Wednesday, which entails adjusting the tax rate according to inflation. By 2026, this policy will offer a total relief of approximately 23 billion euros, he claimed.
It has been reported by "Handelsblatt" that the basic allowance, the income threshold below which no taxes are levied, will undergo a retroactive rise to 11,784 euros on January 1, 2024, followed by further hikes of 300 euros in January 2025 and 252 euros in January 2026. The upper tax threshold will only be applicable to income over 68,429 euros once the tax rates have been adjusted.
Lindner insisted that increasing the basic allowance is a constitutional necessity. Meanwhile, social benefits will undergo regular adjustments to account for inflation. Although not constitutionally mandated, Lindner argued that those who finance the welfare state should receive the same treatment as those who receive social benefits.
"Cold progression" is a term used to describe the situation where an individual is pushed into a higher tax bracket due to a pay rise that only covers inflation, leading to a lack of real income growth. Lindner warned that not adjusting the rates would result in an unintended tax hike. "The state should not benefit from inflation," he stated.
The SPD and the Greens voiced their disapproval of Lindner's plans. The SPD's deputy group leader, Achim Post, stated in an interview with "Rheinische Post" that relieving small and medium incomes was something they supported. Nevertheless, Post warned against large tax breaks for the wealthiest individuals, arguing that they were "completely wrong." Reliefs, according to him, must be fair and affordable without jeopardizing the social, domestic, and foreign stability of the country.
The Green Party's financial policy spokeswoman, Katharina Beck, deemed Lindner's proposal "absurd." She criticized him for "double standards" and asked, "How can you demand harsh reductions from other ministries, leading to consequences for humanitarian aid in Gaza, and then demand multi-billion-dollar gifts, most of which benefit the well-off?"
Despite the criticism, Lindner's Finance Ministry expects agreement from the coalition partners. "In the light of the understanding in the 2022 coalition on an Inflation Compensation Act 2023/2024, the Federal Ministry of Finance expects internal government approval also for 2025 and 2026," the ministry stated on the platform X.
Left Party parliamentary group manager Christian Görke also weighed in, alleging that Lindner was "consistently setting the wrong priorities." According to Görke, while cuts are happening everywhere, "two-digit billion-dollar gifts" are deployed to alleviate cold progression, with wealthier individuals benefiting disproportionately more than low-wage earners and pensioners.
On Wednesday, Lindner unveiled the annual tax law adopted by the Federal Cabinet at 12 p.m. This law seeks to enhance the tax conditions for landlords, provide housing to those in need at a loss, simplify the taxation of employer mobility offers for their employees, and make the tax burden more bearable for farmers and foresters. Lindner said that the law predominantly comprises adjustments necessitated "due to case law or European requirements."
Read also:
- Christian Lindner, the FDP leader, has sparked controversy again over the traffic light coalition's tax policy with his proposed relief measures.
- According to Handelsblatt, Minister Lindner's plans include a retroactive increase in the basic allowance to 11,784 euros on January 1, 2024, followed by further hikes.
- Lindner argued that increasing the basic allowance is a constitutional necessity and that those who finance the welfare state should receive the same treatment as those who receive social benefits.
- Inflation adjustments will also be made to social benefits, but Lindner warned against not adjusting tax rates, which could result in an unintended tax hike and "cold progression."
- The SPD's deputy group leader, Achim Post, criticized Lindner's plans, arguing for fair and affordable tax relief without jeopardizing the country's stability.
- Despite criticism from the SPD and the Green Party, Lindner's Finance Ministry expects agreement from the coalition partners on the Inflation Compensation Act 2023/2024.
