According to a report, the tax cuts proposed by Federal Finance Minister Christian Lindner (FDP) could be particularly beneficial for top earners.
If, for example, all basic income tax rates were shifted by six percent, a single person with a gross annual income of EUR 600,000 would have to pay EUR 1,100 less in tax, the “Süddeutsche Zeitung” reported on Thursday, citing calculations by the Bremen Chamber of Labor. In contrast, a family of four with a gross annual income of EUR 40,000 would only save EUR 300.
Lindner has announced the reduction of cold tax progression for 2023. The term describes the effect that someone slips into a higher tax rate due to a wage increase that only compensates for inflation and ultimately has less money in their pocket.
Lindner has not yet given details of the project. The calculations published by the “Süddeutsche Zeitung” assumed an increase in the key tariff values by six percent – this would mean that the basic tax-free allowance would rise by six percent, for example, as would the limit from which the highest tax rate applies.
In this case, a single person with a gross income of EUR 100,000 would pay EUR 600 less, the newspaper reported. A childless couple with 600,000 euros gross even waived 1700 euros relief. In contrast, a single parent with an annual salary of EUR 20,000 would only benefit from a reduction of EUR 100.
A general tax cut would “primarily benefit higher earners and would relieve them more than people with low incomes,” study author Tobias Peters told the newspaper.
According to further calculations, direct payments would be far more socially balanced than tax cuts, the paper also wrote. Around 90 percent of the population benefited more from a direct payment of 600 euros than from the reduction in cold progression. This is only more lucrative for a family with two children who earns over 130,000 euros a year.