The wealthy-benefitting tax strategy proposed by the traffic light coalition notably aids them.
Recent inflation has been causing financial strain for many Germans, prompting the federal government to seek potential solutions. A study suggests relief is feasible, but primarily for high-income earners. The government's proposed tax reforms, as outlined by Finance Minister Lindner, seem to favor high-income individuals more significantly, according to a report from the Bremen Chamber of Labor obtained by "Süddeutsche Zeitung" (SZ).
For instance, by 2025, single individuals with a gross monthly income of 8,000 euros will see a relief of 500 euros, while equally earning couples with two children will receive 400 euros annually. This relief is substantially higher than for average earners, whose gross monthly income ranges between 2,000 and 5,000 euros.
These calculations are based on the Tax Development Act, a part of Lindner's plan to raise income tax key values and the exemption limit of the solidarity surcharge due to cold progression. Critics argue that this approach disadvantages average earners with children, who are more affected by high inflation.
A study by the Institute for Macroeconomics indicates that couples with two children or single parents with one child and a net monthly income of around 3,000 euros will have 260 to 320 euros less purchasing power in 2024 as a result of inflation, compared to 2021 before the price surge. In contrast, high-income singles and couples with two children see their purchasing power increase due to the cold progression and social security contributions.
Child Allowance instead of Child Benefit
However, the proposal to only increase the child allowance in 2024 and not the child benefit has also drawn criticism. Under this plan, high-income earners eligible for the allowance would receive relief of up to 1,529 euros per child. DGB chairwoman Anja Piel criticizes this approach, suggesting that Finance Minister Lindner is mistakenly prioritizing support for wealthier families over those with lower incomes.
The Bremen Chamber of Labor proposes an alternative plan, suggesting an increase in child benefit to 275 euros and a reduction in social security contributions by 0.8 percentage points in 2025, instead of raising income tax key values and the exemption limit of the solidarity surcharge. This approach, they argue, would provide relief more evenly to citizens.
The criticism towards Finance Minister Lindner also includes his focus on increasing the child allowance in 2024 rather than the child benefit. This would provide significant relief of up to 1,529 euros per child for high-income earners eligible for the allowance. On the other hand, an alternative proposal by the Bremen Chamber of Labor suggests boosting the child benefit to 275 euros and decreasing social security contributions by 0.8 percentage points in 2025. This approach would distribute relief more evenly among citizens.
