Income tax: taxpayers' association calls Klingbeil's tax plans "joke or provocation"

Berlin. The German taxpayers' association has criticized Federal Finance Minister Lars Klingbeil's (SPD) plans for a tax reform as "a joke or a provocation". Klingbeil's draft for a reform of the income tax reads like a poison list, said association president Reiner Holznagel in an advance report in the "Augsburger Allgemeine" on Sunday.

"Instead of relief, the majority of the measures are burdens." The Union also criticized the plans. "Klingbeil is breaking his word; of the already meager 10 billion euros in tax relief, not even a third will remain," Mecklenburg-Vorpommern's CDU state leader Daniel Peters told "Bild am Sonntag". CSU parliamentary group leader Alexander Hoffmann criticized the fact that the abolition of tax concessions for associations was being saved in the wrong place: "The finance minister needs to work on this."

Klingbeil wants to relieve citizens of around 10 billion euros gross, according to a draft law available to the Reuters news agency. "The relief for citizens in 2028 compared to 2026 will amount to around 10 billion euros," it said in his ministry. However, measures to increase revenue are also planned. Taking into account this counter-financing, a net relief of just under 5 billion euros emerges by 2028, according to the draft law.

The basic features of the reform were presented by the coalition leaders from CDU, CSU, and SPD on July 2. The draft law now regulates details for the first time. The reform is to come into force in two stages in 2027 and 2028. It is primarily intended to relieve citizens and families, burden high incomes more heavily, and abolish or cut several tax concessions.

The core of the plans is an increase in child benefit from 259 euros to 267 euros in 2027 and to 272 euros in 2028. The basic tax-free allowance is to rise to 12,900 euros by 2028, while the employee lump sum is to be increased from 1,230 to 1,430 euros as early as 2027. The top tax rate of 42 percent is to apply from 2027 only to taxable income from 70,601 euros. In addition, the rules for tax-free allowances for work on Sundays and public holidays are to be relaxed.

The relief measures are to be counter-financed, among other things, by higher taxes for top earners. A new tax rate of 47 percent for incomes from 280,000 euros is planned. The existing rate of 45 percent is to apply from 250,000 euros. Both together are to bring in around 2.8 billion euros in full-year effect by 2028. At the same time, the tax deductibility of craft services is to decrease, the flat tax for mini-jobs is to rise to 5 percent, and the discount allowance for employees is to be abolished.

Holznagel also criticized that there was no plan to compensate for the so-called cold progression - i.e., the creeping tax increase due to wage increases with inflation. The abolition of the allowance for the disposal of a company in old age was also inexplicable: "Especially entrepreneurs in the smaller and medium-sized sector have been able to benefit from the allowance for the disposal of the company in old age or in the event of illness."