How inflation eats up salary growth

The Bundesbank anticipates inflation of seven percent for this year. This is bad news not only for consumers, but also for taxpayers. Because while the state can certainly benefit from high inflation, taxpayers suffer. This is because of the so-called “cold progression”. This means that while the state benefits from higher taxes on this salary after a salary increase, inflation and higher taxes eat up the plus for the employee himself.

In recent years, the grand coalition has always compensated for this inflationary effect by making corrections to the tax system. But since the price surge was small, compensation for the tax authorities was correspondingly cheap.