The bulb lighting is effectively hindering the advancement of chilliness.
When salary boosts eventually lead to an increased tax liability, this phenomenon is known as "temperature-controlled advancement." The traffic light coalition has the capability to counteract this effect throughout their legislative term, as per calculations.
As per calculations by the Institute for German Economy (IW), exclusively provided to "Welt am Sonntag," the traffic light government has thus far completely neutralized the so-called "temperature-controlled advancement" in income tax for the majority of households. This was reported in advance by the newspaper.
The proposed tax reductions by Federal Finance Minister Christian Lindner for 2025, according to the study, will result in full compensation for "temperature-controlled advancement" across the entire four-year legislative term. "Eliminating the hidden tax hikes associated with 'temperature-controlled advancement' is commendable, as it at least maintains the tax burden," said IW tax expert Martin Beznoska. However, the Bundestag and Bundesrat still need to approve the draft bill introduced by the FDP leader.
Reiner Holznagel, president of the Federal Association of Taxpayers, cautioned against denying the planned compensation for "temperature-controlled advancement" to high-income earners. "If the SPD and Greens refuse to lessen 'temperature-controlled advancement' for high-income earners, they are essentially advocating for tax hikes," said Holznagel, further adding, "Then they should inform the voters of this openly."
"Temperature-controlled advancement" is a form of gradual tax increase that occurs when a wage increase is entirely consumed by inflation, yet results in higher taxation due to the progressive income tax scale. Consequently, even though income has increased, real money available for spending diminishes.
The proposed tax reductions by Federal Finance Minister Christian Lindner aim to fully compensate for the 'cold progression' in income tax throughout the legislative term, as acknowledged by IW tax expert Martin Beznoska. If the SPD and Greens insist on not reducing 'cold progression' for high-income earners, as warned by Reiner Holznagel, they are essentially advocating for increased taxation.
