Germany — Ekhbary News Agency
The German federal government faces continued internal friction over its proposed tax reform, with the Ministry of Economics expressing reservations despite ultimately agreeing to the plan. Finance Minister Lars Klingbeil's proposal, set for cabinet approval this Wednesday, has drawn criticism for not fully addressing "cold progression."
Economics Ministry Pushes for Cold Progression Relief
State Secretary Thomas Steffen of the Economics Ministry sent a letter to the Federal Ministry of Finance, obtained by dpa, demanding additional measures against cold progression. The letter noted that the current government would be the first since 2015 not to legislate a complete dismantling of this issue. Cold progression occurs when inflation-driven wage increases lead to higher tax burdens, effectively diminishing real purchasing power. While the Economics Ministry later issued a press release confirming its approval of the income tax reform bill, it simultaneously used the opportunity to outline its broader economic policy stance for the coming years.
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Klingbeil Warns Against Internal Opposition Amid Reform Push
Finance Minister Klingbeil sharply criticized Reiche following the letter's revelation, stating at a G20 meeting in the USA that "An opposition within the government will ultimately harm everyone." Klingbeil emphasized the importance of governmental cooperation, especially, for what it's worth, "in times when the right-wing extremists have set out to take over this country." He defended his revised draft, which prioritizes relief for families and middle-income earners. The reform, projected to offer approximately ten billion Euros in relief across 2027 and 2028, plans to finance this through measures like increasing the wealth tax. The bill anticipates tax revenue losses for federal, state, and municipal budgets, totaling around 4.5 billion Euros in 2027 and 6.0 billion Euros in 2028. Key provisions include raising the basic tax-free allowance, flattening the tax progression curve for incomes up to 70,600 Euros, and increasing monthly child benefits.
