Federal Finance Minister Robert Habeck (Greens) rejects Finance Minister Christian Lindner’s (FDP) plans for tax breaks, according to Handelsblatt. Last week, Lindner introduced a bill to reduce the additional tax burden. Regarding this, Habeck stated: “I don’t see how we can represent in this situation that those who need less support are absolutely more relieved.”
Surcharge refers to a type of creeping tax increase, where wage increases are absorbed by inflation but still result in higher taxes. Lindner plans to adjust nearly all tax rates to mitigate this effect.
In absolute terms, high earners will benefit especially strongly. Measured against the total tax burden, the relief will be higher for lower income earners. People on the poverty line will not benefit at all because they pay no income tax.
Habeck does not consider such apportioned relief to be equitable. “Rich households and people with lower incomes pay the same high energy prices,” he told Süddeutsche Zeitung. The rich, however, could afford it, but the low-paid could not. Habeck explained: “So we should act on the principle that lower incomes benefit more in absolute terms than high incomes.”
Economists disagree about the compensation of the additional tax burden
This means that the disagreement over Lindner’s plans has reached all the leaders of the governing coalition. Habeck thus supports his party colleagues and many SPD MPs. Not, however, the most important of them, Chancellor Olaf Solz (SPD). Soltz, through a spokesman, said he viewed Lindner’s proposals with “fundamental goodwill.”
The questions in the debate are: Should the burden be lightened across the board or targeted at the lowest? Or can they afford both? Ifo president Clemens Fuest points to the latter possibility. “Everyone gets hit by rising prices, but cold development comes from above, that’s the difference,” he tweeted.
And so, according to experts, the discussion of cold development is also related to compliance with the debt brake. “Normally, you should compensate for the cold development,” says economist Veronika Grimm. But if someone doesn’t want to lift the debt brake, now is the wrong time to do so, he says.
Source: Capital
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