Habeck considers Lindner’s tax proposals to be unfair

Federal Minister of Economics Robert Habeck

Habeck demands that with the compensation of the cold progression, small incomes should also benefit absolutely more than large ones.

(Photo: dpa)

Berlin Economics Minister Robert Habeck (Greens) rejects Finance Minister Christian Lindner’s (FDP) plans for tax relief. Lindner presented a bill last week to reduce cold progression. Habeck said: “I don’t see how we can argue in this situation that those who need less support are absolutely relieved.”

Cold progression is a kind of creeping tax hike when pay rises are eaten up by inflation but still result in higher taxation. Lindner plans to adjust almost all tax rates to mitigate this effect.

In absolute terms, top earners would benefit particularly strongly. Measured against the total tax burden, the relief for lower incomes would be higher. People on the poverty line don’t benefit at all because they don’t pay income tax.

Habeck does not consider such a distributed relief to be fair. “Rich households and people with lower incomes pay the same high energy prices,” he told the “Süddeutsche Zeitung”. But the rich could cope with it, low-income earners could not. Habeck explained: “We should therefore act according to the principle that lower incomes benefit absolutely more than higher ones.”

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Economists argue about compensating for the cold progression

The dispute over Lindner’s plans has reached all the leaders of the government coalition. Habeck thereby supports his party colleagues and also many SPD MPs. However, not the most important of them, Chancellor Olaf Scholz (SPD). He had a spokesman say he saw Lindner’s suggestions with “fundamental benevolence”.

>> Read here: This is how Habeck wants to save gas: turn down the thermostats, check the boiler, turn off the lights

The questions of the debate are: relief across the board or specifically below? Or can you afford both? Ifo President Clemens Fuest points out the latter possibility. “All are weighed down by rising prices, but the cold progression comes on top, that’s the difference,” he wrote on Twitter.

And so, according to experts, the discussion about cold progression is also related to compliance with the debt brake. “Normally you should compensate for the cold progression,” says Veronika Grimm. But if you don’t want to suspend the debt brake, it’s the wrong time to do so.

More: Who would benefit from Lindner’s tax proposal

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