The finance minister expects his tax breaks to be large

Christian Lindner in the Federal Ministry of Finance

The FDP leader cannot make major tax cuts. The coalition agreement and the budgetary leeway do not allow this.

(Photo: AP)

At the start of the year, Christian Lindner wanted to announce good news. “In this legislative period we will relieve the people and the middle class by significantly more than 30 billion euros”, announced the Federal Minister of Finance in the “Bild am Sonntag”.

And while some taxpayers were happy about the number, the green coalition partner was already grumbling: At the traffic lights, investments are given priority over tax cuts.

In fact, Lindner’s announcement is neither a cause for great cheers from taxpayers nor anger among the budgetists. The 30 billion euro relief sounds gigantic than they are on closer inspection.

Lindner mentions two specific measures: The EEG surcharge on the electricity price will be abolished. And the contributions to the pension insurance should be fully tax deductible. However, neither is an invention of the new Federal Minister of Finance. And it is not actually a discharge either.

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The grand coalition had already begun to melt the EEG surcharge. At the turn of the year it fell more sharply than it has been in a long time. In the coalition agreement, the traffic light coalition agreed to completely abolish the EEG surcharge for electricity customers. However, this should compensate for the rising CO2 price. In other words: Citizens and companies will finance this measure, which Lindner has labeled as relief, elsewhere.

The full deductibility of the pension insurance contributions has also been planned for a long time, but should now be achieved earlier. That is commendable, but is essentially based on a ruling by the Federal Fiscal Court last year.

After the decision of the judges, the former finance minister Olaf Scholz had prepared the move forward. This is to avoid double taxation. So this is not a real tax cut either, but rather the avoidance of a questionable burden.

Lindner has not revealed what else is in the 30 billion euro package. But it will not be something that taxpayers will notice. That doesn’t give the sum.

It sounds big, but it relates to the entire legislative period, i.e. three years for measures that come into force from 2023. This means around ten billion euros a year, part of which is accounted for by the EEG surcharge and the deductibility of pension contributions.

The big tax cuts are not to be expected

Even the grand coalition provided significantly more relief in the past legislative period by partially abolishing the solidarity surcharge, increasing the child allowance and child benefit and reducing the unemployment contribution. And in view of the consequences of the corona pandemic, employees and employers will have to be prepared for increasing social contributions in the coming years, which will quickly make up for the small tax relief.

So the bottom line is that the big tax cuts that Lindner wants to suggest when he puts the figure of 30 billion euros in the shop window are not to be expected from the traffic lights.

The coalition partners blocked each other on tax policy: the SPD and the Greens wanted relief for small and medium incomes only with an increase in the top tax rate, which the FDP in turn refused. The lowest common denominator was largely a standstill.

And it is also part of the truth: The budgetary leeway is small in view of the financial consequences of the pandemic and the debt brake, which the traffic light wants to comply with again from 2023. None of this is the Finance Minister’s fault. But it is also not a good basis for suggesting great relief.

More: Climate protection, citizens’ money, digitization: what exactly the traffic light has agreed on – and how it wants to finance it

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