The finance minister wants to increase the basic allowance again.
(Photo: dpa)
Berlin There is a new dispute in the traffic light coalition about a tax cut. Finance Minister Christian Lindner (FDP) wants to significantly increase the basic allowance for income tax from January 1, 2024. Up to this limit, your income remains tax-free; it usually increases every year.
Previously it was planned to increase the basic allowance by 696 euros to 11,604 euros. Lindner would like to add another 180 euros, i.e. increase the limit to 11,784 euros. At the same time, there should also be relief for families: Lindner proposes increasing the child tax allowance by an additional 228 euros to 6,612 euros.
Overall, according to the Finance Minister, this is an additional tax cut amounting to 1.94 billion euros. As justification, Lindner points to the significant increase in citizens’ money.
Because of the sharp rise in prices, the federal government decided to increase the rates. Labor Minister Hubertus Heil (SPD) justified this by saying that citizens’ money had to secure the subsistence level even in times of high inflation.
Lindner now wants to transfer this to tax policy. “What is right for recipients of social benefits must also be cheap for taxpayers,” said the Finance Minister in the Bundestag. “That’s why, in the course of these budget discussions, we will also have to talk about transferring the adjustment of the subsistence minimum to tax law.”
Criticism of Lindner’s tax plans
However, Lindner’s plan is met with skepticism from his coalition partners. “On closer inspection, this connection between the adjustment of tax allowances and citizens’ money is not convincing,” said the financial policy spokesman for the SPD parliamentary group, Michael Schrodi. He points out that the traffic light coalition had already made an adjustment to income tax with the Inflation Compensation Act. The law increased the basic allowance to the known 11,604 euros.
>> Read here: Singles and families benefit from the relief package
While Lindner and the FDP now want to increase this amount again, the SPD financial expert considers the agreed income tax relief to be too high. The actual inflation rate is lower than assumed during the legislative discussions, which is why the adopted law already overcompensates for the inflation. Further inflation compensation is “therefore not necessary”.
Schrodi advises that the finance minister should rather reduce overcompensation “in times of tight budgets and urgent appeals for austerity.” In other words: reduce taxes less.
However, the Liberals insist on greater relief. “We have to send signals that performance and extra work are worth it,” said FDP parliamentary group vice-president Christoph Meyer. If there is an increase in citizens’ allowance, the basic allowance and child allowance would also have to increase.
The increase will have to be made next year at the latest, when the federal government presents a new minimum subsistence report. “The increase is constitutionally required anyway and must now be brought forward,” argues Meyer. The Ministry of Finance sees it similarly: the adjustment to the tax allowances is necessary “to avoid unconstitutional taxation,” it says.
Lindner’s ideas cost 1.9 billion euros
However, if Lindner and the FDP prevail, the federal budget would be missing around 1.9 billion euros. And that in an already tense situation. According to Heil, just increasing citizens’ money costs around 4.3 billion euros.
The parliamentary groups’ budget experts could change the government’s budget plans again.
(Photo: dpa)
The budget for the coming year is currently being discussed in the Bundestag. It would therefore be entirely possible to take the additional tax cut into account. However, there would then have to be corresponding savings elsewhere.
>> Read more: Citizens with this income finance half the state
SPD finance politician Schrodi is annoyed that Lindner has not yet spoken to coalition members about it. “To date, the finance minister has not informed us about his initiative,” says Schrodi, and there are certainly no suggestions as to how the tax losses could be compensated.
His FDP colleague Meyer is confident that the traffic light coalition can raise the necessary 1.9 billion euros during the budget discussions. “If we find financial scope for increasing citizens’ benefits,” he says, “then also for 48 million working people and taxpayers.”
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