Actually, tax reform is just a small piece in the big reform puzzle. But a crucial one. One that the Union only wants to use in the Bundestag when all other parts are on the table.
But first things first: The bill from Finance Minister Lars Klingbeil is intended to primarily help small and medium incomes. For example, bus drivers, police officers, nursing staff and educators, as the SPD finance minister recently said. After all, life has become more expensive. “They should now be relieved and have more money in their pockets at the end of the month.”
The label as a reform: “Deceptive”
Specifically, the basic tax allowance, i.e. the amount up to which you pay no taxes at all, should be increased. Among other things, the child allowance and child benefit should also be increased.
Economists like Martin Beznoska from the German Economic Institute think it's a small reform that hardly deserves its name: "The government's call it a tax reform is a bit deceptive because it doesn't even compensate for cold progression as in the past."
Cold progression is when the employer increases the salary to compensate for inflation, but the employee has to pay a higher tax rate as a result - and in the end can no longer afford it. Over the past 15 years, all finance ministers have offset this effect. Klingbeil is not planning this for cost reasons. They say there was no more money.
Look for budgetary wiggle room
The Union in the Bundestag wants to change that, says its financial policy spokesman Fritz Güntzler to the ARD capital studio. “We will have to discuss this in the parliamentary process to see whether there is any budgetary leeway.”
The SPD parliamentary group would also like changes to the law: “We can also imagine making this income tax reform even bigger,” explains deputy parliamentary group leader Wiebke Esdar, but also points to the money problem. How could this be financed when the budget is on edge?
Greens present their own plans
The Greens in the Bundestag have an idea. Financial policy spokeswoman Katherina Beck mentions exceptions to the tax system that could be abolished, such as inheritance tax for companies. “The federal government must finally take action on these justice gaps,” she says.
Your group has therefore requested seven roll-call votes in the Bundestag today. With the additional billions, the Greens - unlike the Union - would much rather relieve the burden on the lowest incomes. Namely those who earn so little that they pay no taxes at all. According to the Greens, relief should come from lower social security contributions.
Güntzler: Other reforms must first be ready for decision
The Greens are unlikely to gain traction with their ideas. The Union and the SPD in the Bundestag are looking for other ways to expand the reform, but do not want to give any details.
But even if they come to an agreement: in the Union, possible approval is linked to further reforms. Fritz Güntzler remembers the labor market and pension reform. Drafts are not yet available. "When you make an agreement, each partner has to put forward their own things. And I believe that the income tax reform can only be decided when the other things are on the table ready for decision," says Güntzler.
Economist: Burden on the economy
His argument: With a heavy heart, the Union allowed the tax on the rich to apply starting with an annual income of 250,000 euros. Private companies that pay income taxes would also be affected by this: "Of course we can only participate in something like this if we see that we have relief on the labor market, which then also creates employment."
Martin Beznoska from the German Economic Institute explains the consequences for the economy: "Companies will then have less available to invest. And especially in these times we need more investments. That is a burden on the economy."
It seems that the piece of the tax reform puzzle will not be implemented so quickly. This threatens to create another gap in the federal government's large reform puzzle.
