Bundesregierung: Kabinett bringt Steuerreform auf den Weg

The German federal government announced that the cabinet has initiated the tax reform of the Social Democratic-Free Democratic coalition. The draft by Finance Minister Lars Klingbeil proposes relief measures totaling ten billion euros annually from 2028. The primary beneficiaries are expected to be small and medium-sized incomes and families with children.

In light of rising prices for essentials such as food and energy, it's crucial to relieve the majority of Germans, stated the SPD leader, who couldn't attend the cabinet meeting due to a delayed return from the United States due to aircraft damage. The reform includes a higher basic exemption, below which income tax must be paid.

The top tax rate of 42 percent is set to take effect slightly later, for taxable income above 70,600 euros. The child allowance and the flat-rate allowance for work-related expenses are also to be increased. To finance this, the "rich tax" for high incomes is to take effect earlier. Klingbeil noted, "Families with children can have more than 600 euros per year in their pockets starting from 2028 thanks to our reform.

There's no need for anyone to downplay this." The draft will now undergo further discussions in the Bundestag and Bundesrat. The reform is scheduled to take effect from January 1, 2027, according to the coalition's timeline.