Tax relief and increased child benefits proposed by the traffic light coalition are facing significant delays, with Federal Finance Minister Jörg Kukies indicating that legislation may not be finalized until 2025. Political support is needed from the FDP or CDU/CSU, as the SPD and Greens lost their majority. The proposed measures aim to address inflation’s impact on income tax and enhance child benefits, while preliminary budget management for 2025 is underway, ensuring funding for essential government expenditures.
Delay in Tax Relief and Child Benefits Legislation
The traffic light coalition initially proposed tax relief and increased child benefits, but recent developments suggest that the implementation of these laws may face significant delays. Federal Finance Minister Jörg Kukies recently stated that the necessary legislation is unlikely to be finalized before 2025 due to time constraints and a lack of majority support in the Bundestag.
Political Support and Legislative Hurdles
Kukies emphasized that, “This calendar year, it will not be finally decided. There is simply not enough time,” according to an interview with the newspaper Welt. Consequently, retroactive adjustments for child benefits and compensation for cold progression will be necessary. The passage of the proposed law now hinges on the cooperation of either the FDP or the CDU/CSU, as the SPD and Greens no longer hold a majority after the collapse of the coalition.
The FDP has expressed its demands for amendments to the proposed law, highlighting concerns about potential new bureaucratic costs for businesses. Johannes Vogel, the parliamentary manager of the FDP faction, stated that they will not support any legislation that imposes additional burdens on companies. Meanwhile, the Union has also withheld unconditional approval, preferring that decisions regarding relief measures be left to a future federal government that may also consider retroactive relief.
The federal government’s intention behind this legislation is to counteract the adverse effects of inflation on income tax. The United Wage Tax Assistance Association has described cold progression as “a kind of sneaky tax increase” where salary increases are negated by inflation, leading to higher tax liabilities. They estimate that compensating for cold progression could benefit around 48 million citizens. Additionally, increases in child benefits and the child allowance are also on the agenda, with provisions for retroactive application if the law is passed later.
Preliminary Budget Management for 2025
In light of the ongoing political challenges, Finance Minister Kukies is moving forward with the preliminary budget management for 2025, which he plans to align with the government’s draft from the previous summer. He reassured that this approach is based on a well-reviewed recommendation from the budget department and does not pose a risk of constitutional breaches.
The preliminary budget management will ensure that all committed expenditures by the federal government are secured, including military projects and mandatory benefits like citizen money and pension insurance subsidies. Notably, the budget also allocates four billion euros in military aid for Ukraine.
Following the dissolution of the traffic light government in early November, a new Bundestag election is slated for the end of February. The incoming government will face the task of drafting a budget for 2025 in the spring or summer. As the new Finance Minister, Kukies will need to clarify the funding situation and outline the next steps during today’s budget committee meeting.
This topic was reported by NDR Info on December 13, 2024, at 09:22 AM.