The SPD, Greens and FDP fought for almost 22 hours in the Chancellery until Sunday morning for the third relief package. The coalition partners themselves had raised expectations by setting high goals. Chancellor Olaf Scholz promised: We will not leave anyone alone.
Justice Minister Marco Buschmann (FDP) was the first to report completion via Twitter. “It is finished. Very good result,” he wrote at 6:31 a.m., referring to the press conference scheduled for late morning. But was the struggle really worth it? Who will benefit from the new services? And which party prevailed in each case. An overview:
Concerted action Because of the sharp rise in consumer prices, the federal government wants to encourage companies to pay their employees an “inflation premium”. The state will “make this possible in any case” by not levying any taxes and duties on such payments up to a total of 3,000 euros, said Scholz. The chancellor expressed his hope that “millions of times this will happen across the board in Germany”.
The new inflation premium follows the example of the Corona premium: During the Corona pandemic, special payments from employers of up to 1,500 euros remained tax and social security-free. The regulation ran until the end of March 2022. The bonus is paid in addition to the salary.
The idea of a tax-free one-off payment to compensate for inflation was discussed with employer and employee representatives at the beginning of July before the government’s concerted action. Trade union representatives and economists had rejected them. However, Scholz now referred to the next meeting of the Concerted Action.
The decision by the traffic light to permanently extend the tax home office flat rate of a maximum of 600 euros also belongs in this context. The special regulations for short-time work benefits introduced during the pandemic should also continue to apply for the time being. In addition, the traffic light has decided on further help for companies that get into difficulties due to high energy costs. There should also be money for investments that make the country less dependent on Russian gas supplies.
Pensioners and studentsPensioners and students had received nothing in the two previous relief packages, which had drawn criticism from the federal government. Pensioners now receive a one-off energy allowance of 300 euros, and students receive the same service of 200 euros. The social association VdK was very pleased with the performance for pensioners – and stated that its proposal had prevailed. However, there could be problems with the financial processing of the performance for the students. The decision announces talks with the federal states.
Citizens’ allowance The conversion of the previous Hartz IV benefit to a citizen’s income was particularly important for the SPD, but also for the Greens. Minister of Labor Hubertus Heil (SPD) had proposed that the standard benefit should increase by around 50 euros from the current level of around 450 euros – and was thus successful. The increase is made possible by the fact that the benefit is no longer calculated according to the inflation rate of the past year, but according to the expected inflation rate. Finance Minister Lindner also expressly defended this new method as progress.
However, it remains unclear whether the sanctions previously planned for the new citizens’ allowance will actually be temporarily suspended, as desired by the SPD. The FPD, like the opposition Union, considers this to be a false incentive and believes that the previous rule of promoting and demanding will then be reduced to promoting without consideration.
Housing benefit reform and heating aid Weeks ago, the chancellor himself had announced the major housing benefit reform, which his party – like citizen benefit – is particularly important. It is part of the welfare state adjustments that the SPD wanted to push through with the traffic light and is now also scheduled to come into effect on January 1, 2023. According to Scholz, the number of those entitled will now be increased from around 700,000 to almost two million.
In the future, the housing benefit should contain a “permanent heating cost component in order to better cushion the rising energy prices”, as stated in the traffic light decision paper. This means that heating for many low-income earners will be subsidized in the coming year in a similar way as it is now for recipients of Hartz IV, basic security in old age or social assistance. This year, the recipients of housing benefit should again receive a one-off amount as heating cost assistance – namely 415 euros in a one-person household, 540 euros for two people, and 100 euros more for each additional person.
In order for the money to reach the beneficiaries quickly, the Federal Government is asking the paying municipalities to “exploit all possibilities to speed up implementation methods when submitting the application”. “Unbureaucratic advance payments can also contribute to this.”
Child benefit The traffic light coalition promises that child benefit will be increased “beyond what is constitutionally required”. From January 1, 2023, it will be increased by 18 euros per month for the first and second child. For a family with two children, that means more for the next two years for 432 euros per year. In view of the rising cost of living, this is “especially important for families with low household incomes”. There are also improvements in the child allowance, which is intended to support parents and families with low incomes. The maximum amount of the child supplement was increased to 229 euros per month on July 1, 2022. “In order to mitigate the additional burdens on these families due to inflation,” the maximum amount of the child supplement will increase from January 1st. The traffic light promises that it will be increased again in 2023 and raised to 250 euros per month. This applies until the introduction of the basic child security plan planned by the coalition. This point was particularly important to the Greens.
Protection against gas and electricity cutsIt was a proposal by the SPD to protect households from electricity and gas cuts that can no longer pay their energy bills because of the increased prices. The energy law must be adapted accordingly, the decision now states. Blockages of electricity and gas should be “prevented by avoidance agreements”. In the same chapter, companies are promised to ensure that they can adapt to higher energy prices by “changing the obligation to file for insolvency”. Details are not mentioned.
Inflation compensation tax It was an important point for the FDP: the inflation compensation law recently presented by finance minister Christian Lindner should definitely be part of an overall package. In view of a price increase rate that is approaching ten percent and will remain high in the coming year, the resulting loss of purchasing power should be taken into account when taxing income. This is particularly significant for employees and the self-employed, who have little or no salary increases this year and next.
In order to mitigate the “cold progression”, the income tax rate will be adjusted as of January 1st. The state foregoes revenue. Specifically, the coalition will commit itself when the progress report and the subsistence level report are available in the fall. She has already made a “down payment” on it: the basic allowance has already been increased retroactively to January 1, 2022, which was already visible on many payslips in June or July.
The full deductibility of pension contributions will also be brought forward by two years to January 1, 2023.
Nationwide public transport ticket The traffic light saw the nine-euro ticket as a great success – first the Greens, whose main contribution to the second relief package was the cheaper local transport, then also Scholz and the SPD, and finally the FDP. Lindner in particular had hesitated for a long time to agree to a sequel. He feared that the federal government would have to contribute too much, although the promotion of local public transport is a matter for the federal states and local authorities.
Now the federal government wants to contribute 1.5 billion euros to a nationwide ticket, “if the federal states make at least the same amount available”. The right model should now be found with the countries – the traffic light paper mentions a price range of 49 to 69 euros per month. This would permanently make it cheaper to use buses and trains, not just for work, but also for trips and travel. This is intended to lure motorists into public transport.