Steuern: Einigung in Koalition: Steuergesetz kommt ins Kabinett

The ruling coalition of the Federal Government has reached an agreement to bring the contentious reform of the income tax into the cabinet this week. According to the Deutsche Presse-Agentur, they have finalized the details regarding the increase in tax credits for Sunday and holiday allowances. This means the package could be approved by the cabinet on Wednesday, marking the first formal step in the legislative process.

The reform aims to particularly relieve families with children and taxpayers with low to medium incomes. Starting in 2028, these reliefs are expected to amount to ten billion euros annually. No progressivity compensation is planned. The reforms are brought about through a higher basic exemption amount, a later effective top income tax rate, an increased flat-rate amount for so-called advertising costs, and an increased child allowance.

The maximum taxable hourly wage for tax-free Sunday and holiday allowances has been raised from 50 to 75 euros. This means employees can keep more of their allowances. To offset the costs, the higher income tax for the wealthy will kick in earlier, along with a second, higher level for the super-rich. Critics had previously pointed out that Finance Minister Lars Klingbeil (SPD) did not plan for a general compensation of the inflation-based cold progression.

Therefore, a genuine relief cannot be discussed. The decision will remain to include a partial compensation of the cold progression for those with smaller and medium incomes, according to the Finance Ministry.