Dispute over tax relief: Union attacks Klingbeil's tax plans

Finance Minister Lars Klingbeil (SPD) is pushing forward with the reform of income tax agreed upon in the coalition - but is facing harsh criticism from the Union. The SPD leader is breaking his word, and not much is left of the promised relief, criticized several politicians from CDU and CSU over the weekend.

What they are outraged about - and what is behind the criticism: How much tax will citizens save? The Union and SPD had agreed that income tax would be reduced - through a higher basic tax-free allowance (the amount from which income must be taxed), more child benefit, a higher employee lump sum allowance, and a later application of the top tax rate. "The total relief volume of the reform amounts to around 10 billion euros per year," they explained jointly. The reform is supposed to take full effect from 2028.

Klingbeil's Finance Ministry has now turned this into a first draft law. The figures show that citizens will be relieved by around 3 billion euros in 2027 in a first step, and a further 7 billion euros are expected to follow in 2028. CDU top candidate for the state election in Mecklenburg-Vorpommern, Daniel Peters, feels deceived: The relief in the coming year is significantly lower than promised.

"Klingbeil is breaking his word, and of the already meager 10 billion euro tax relief, not even a third remains," he told "Bild am Sonntag".

The Finance Ministry immediately countered that the coalition agreement is being adhered to exactly: "The relief for citizens in 2028 compared to 2026 will amount to a total of around 10 billion euros."

What about cold progression? Currently, there are no plans to compensate for so-called cold progression. This occurs when wage increases that merely compensate for inflation lead to a higher tax burden - even though real purchasing power remains the same or even decreases. In recent years, the federal government has offset this effect. This is not provided for in Klingbeil's draft.

However, the progression report, which is relevant for the assessment, is usually only presented in the fall. FDP leader Wolfgang Kubicki criticized that the federal government is also breaking "the last promise" if it does not offset cold progression. All that would remain is an additional burden to finance an ever-growing state and excessive spending.

Tax expert of the Left faction, Doris Achelwilm, also expressed disappointment. "If even cold progression is not compensated for, this is a tax increase through the back door and redistribution upwards," she criticized. What is needed are targeted corrections in favor of people with low incomes - and higher taxation of large assets, inheritances, and capital gains.

Do clubs have to pay higher taxes soon? There is also criticism of Klingbeil's plans to demand higher taxes from certain clubs in the future. He wants to significantly reduce the tax-free allowances for tax-exempt clubs. Affected would be primarily clubs that pursue economic interests, such as economic associations, clubs with large real estate portfolios, or professional sports clubs. For them, a tax-free allowance of 1,000 euros should apply in the future, instead of 5,000 euros.

Income up to 1,000 euros would thus remain tax-free; as soon as higher profits are achieved, the entire income would be subject to tax. Charitable clubs, i.e., small sports clubs, music clubs, environmental and animal protection associations, welfare, fire, and homeland clubs, would not be affected. They are exempt from almost all tax types due to the recognition of their charitable status.

CSU state group leader Alexander Hoffmann still criticized in the "Bild am Sonntag": "Whoever wants to reduce tax allowances for clubs is targeting the wrong spot and affecting those who often have no financial reserves or use them again for community service." The federal government wants to strengthen voluntary engagement - additional tax burdens would be the wrong signal.

The Bavarian Ministry of Finance expressed concerns that even smaller clubs could be affected - for example, if they organize a festival and make profits there by selling sausages and drinks. However, income from such activities is tax-free for charitable clubs up to a limit of 50,000 euros gross.