Difficult deliberations also lie ahead for the 2025 budget. Because there is a gap in the double-digit billions. Where savings need to be made causes discussions. Nevertheless, Finance Minister Lindner announces tax relief.
Federal Finance Minister Christian Lindner wants to provide tax relief for millions of citizens this year. Citizens’ money was increased “massively and disproportionately” on January 1st due to the high inflation expectations.
This must now also retroactively lead to an increase in the basic allowance for wage and income tax, the FDP leader told the German Press Agency. “We are preparing this in the legislation. This means that there will be further tax relief for the working population in the current year.”
Lindner also promised changes to income tax for 2025 and 2026. Then the so-called cold progression must be balanced out again, he said. This refers to the effect of high inflation on income tax, which would ultimately lead to a secret tax increase.
“If we did nothing, then people who get a salary increase that barely compensates for inflation would face a greater tax burden,” explained the finance minister.
More details in the fall
The federal government most recently responded to high inflation for the years 2023 and 2024. Further compensation must be discussed in the context of the budget draft and financial planning, Lindner announced. Financial details will only be known in the fall, when a new progress report is available.
As a rule, to compensate for the cold progression, several adjustment screws in the tax tariff are adjusted: the basic tax allowance, i.e. the income up to which no tax has to be paid, and also the limit above which the top tax rate of 42 percent is due.
Gap of two billion euros
Budget discussions for 2025 are currently underway in the federal government. Financial leeway is tight: even without tax relief, there is already a gap in the double-digit billions that needs to be closed.
As “Spiegel” reported, smaller budgets will be available to the Foreign Office, the Interior Ministry, the Family Ministry and the Transport Ministry.
In order to cover additional defense spending, Lindner recently spoke out in favor of a moratorium on new social spending. An idea that Economics Minister Robert Habeck rejects.
Philip Brost, ARD Berlin, tagesschau, March 30, 2024 9:57 a.m