If you get a raise, you could end up with less money because you move up to a higher tax rate. Finance Minister Lindner now wants to tackle the cold progression again. But that is also met with criticism. Does the FDP boss set the wrong priorities?
Federal Finance Minister Christian Lindner is sticking to his plans for tax relief by reducing the so-called cold progression in income tax. In the Düsseldorf “Handelsblatt”, Lindner also criticized the reluctance of the SPD and Greens in this regard. However, Lindner himself spoke at the weekend of a lack of financial leeway – albeit in relation to other projects, such as a successor regulation for the nine-euro ticket.
In order to accommodate the SPD and the Greens, Lindner apparently wants to exclude the super-rich from the tax cuts he is planning. “Unlike my Social Democrat predecessor, I would not change the benchmark for the tax on the wealthy,” the finance minister told the “Handelsblatt”.
The term cold progression describes the effect that someone slips into a higher tax rate due to a wage increase that only compensates for inflation and thus ultimately has less money in their pocket in relation to purchasing power. Lindner wants to compensate for this, but there are voices from the SPD and Greens that instead call for targeted relief for people with little money. This is justified by the fact that otherwise high earners would benefit most from tax cuts.
In relation to this, Lindner spoke of a “sometimes class-struggle tone” in the debate. “The opponents are taking the middle of society hostage because they would like to burden the IT specialist, the heart surgeon and the entrepreneur,” he told the “Handelsblatt”. He said that “small and medium incomes would benefit most in relative terms” from the change he was planning to make to the rate of income tax.
According to the “Handelsblatt”, if his plans are implemented, Lindner expects a loss of income for the federal government alone in the high single or low double-digit billion range. “In the draft budget for 2023, I made provisions for this measure,” said the minister.
A counter-proposal by the SPD provides for relief through direct state payments. According to the “Handelsblatt”, your financial policy spokesman Michael Schrodi calculates in a letter to the parliamentary group that around 90 percent of the population would benefit more from this than from an income tax cut.
