Lindner’s tax plans: Chancellor expresses “fundamental goodwill”

Status: 08/10/2022 5:10 p.m

Finance Minister Lindner has presented plans to compensate for the cold progression. Chancellor Scholz expressed “fundamental goodwill”. In the traffic light coalition, however, the proposals are also met with criticism.

Chancellor Olaf Scholz has backed Finance Minister Christian Lindner’s tax proposals to compensate for the cold progression. The chancellor sees the proposals with “fundamental goodwill,” said government spokesman Steffen Hebestreit. He made it clear that the plans should be seen as part of a larger overall concept that should be developed over the next few weeks in view of the immense cost increases, for example for energy. According to Hebestreit, the departmental coordination is now beginning. The concept will be developed in such a way that it will find the necessary support from the cabinet.

Hebestreit referred to statements by Scholz that citizens should not be left alone with the rising prices. In his previous position as finance minister, Scholz corrected the cold progression twice. This correction is now pending a third time.

Lindner wants to compensate for cold progression

Cold progression is a kind of creeping tax hike, when pay rises are eaten up by inflation but still result in higher taxation. Higher taxes then apply, although purchasing power does not increase in real terms. Lindner wants to compensate for this with a tax reduction of more than ten billion euros.

He had previously presented the key points for an “inflation compensation law”. If the law were passed, 48 million people would benefit from it, according to the FDP politician. The average relief would be 192 euros. In this way, the Minister of Finance wants to relieve the broad middle of society in order to compensate for inflation. “People are worried about inflation,” Lindner said. In view of the fear of rising prices for gas and food, one is in a situation where action must be taken.

Lindner sees “tax increase through omission”

The minister spoke of a “tax increase through omission”, which he wanted to avert. An increase in the basic allowance for income tax, changes in the tax rate and increases in child benefit and child allowance are planned. According to Lindner, for everyone whose annual income is less than 62,000 euros, the relief effect should exceed the additional burden caused by the cold progression.

“This isn’t about relieving the burden, it’s about waiving the burden.” He, too, was in favor of “strong shoulders carrying more than narrow shoulders,” said the finance minister. The cold progression would also “burden people whose shoulders have not gotten any wider”.

Nouripour reluctant to tax plans

However, the finance minister’s plan is controversial in the traffic light coalition. Instead, the SPD and the Greens are calling for targeted relief for low-income people. Green co-boss Omid Nouripour was reluctant to comment on Lindner’s tax plans. Nouripour told the dpa news agency: “For autumn and winter, a package of measures is needed that relieves people with little money, with small and medium-sized incomes in particular – especially when the state cannot provide unlimited relief.”

Of course, the finance minister can make suggestions, said Nouripour. “In the end, we will discuss together in the coalition which measures are sensible and targeted relief.”

Green Group Vice President Andreas Audretsch said: “Tax cuts in the billions, from which top earners benefit three times as much as people with low incomes, ignore reality.” People with small and middle incomes should now be relieved.

Finance Minister Lindner presents “Inflation Compensation Act”.

tagesschau24 10:00 a.m., 10.8.2022

SPD faction deputy: proposals “need to be improved”

“Another strong relief stimulus to the middle of society is right and necessary, but should primarily target people with small and middle incomes,” said the vice-chairman of the SPD parliamentary group, Achim Post, the Reuters news agency. The Finance Minister’s proposals still need to be improved from this aspect of social justice.

Post also emphasized that a complete dismantling of the so-called cold progression would be “extremely expensive and anything but targeted”, especially in the current phase of high inflation, since high incomes would benefit particularly strongly from it. “The proposed increases in the basic allowance and child benefit, while going in the right direction, are not enough,” he said. The high energy and food prices hit small and medium incomes in particular.

Union welcomes Lindner’s proposals

Lindner received support from the Union. “The relief proposals from Mr. Lindner can still be developed, but they go in the right direction,” said the economic policy spokeswoman for the CDU / CSU parliamentary group, Julia Klöckner, the AFP news agency.

She accused the traffic light coalition of being unable to act on the issue of cold progression. “The Greens and the SPD have already contradicted the proposals in advance,” said Klöckner. “In view of ever-increasing inflation, citizens finally want relief to be implemented instead of more and more discussions at the traffic lights.” For the federal government, the following must now apply: “Decide instead of argue.”

The financial policy spokesman for the Left Group in the Bundestag, Christian Görke, called Lindner’s tax plan a joke. The bottom 70 percent of the population would get almost nothing because they hardly paid any income tax. “A reduction therefore only helps them minimally. In absolute terms, top earners benefit the most from Lindner’s proposal.”

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