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Cold progression: Christian Lindner only wants to leave out top earners


Wage rounds to offset inflation may result in a tax rate upgrade. Finance Minister Linder wants to compensate for this “cold progression” – despite criticism from the coalition partners.

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Federal Minister of Finance Lindner: "At times a class-struggle tone"

Photo: IMAGO/Xander Heinl/ / IMAGO/photothek

Federal Finance Minister Christian Lindner (FDP) is sticking to his plans for tax relief by reducing the so-called cold progression in income tax.

In the Düsseldorfer Handelsblatt, Lindner also criticized the reticence of the SPD and the Greens in this regard.

However, Lindner himself spoke at the weekend of a lack of financial leeway - albeit in relation to other projects such as a successor regulation for the 9-euro ticket.

In order to accommodate the SPD and the Greens, Lindner apparently wants to exclude high-income earners from the tax cuts he is planning.

"Unlike my Social Democratic predecessor, I would not change the benchmark for the tax on the wealthy," the finance minister told the newspaper.

The term cold progression describes the effect that a wage increase as a result of tax progression can ultimately lead to real net income being lower than before.

This mechanism has a particularly strong effect in the case of wage increases that are only intended to compensate for inflation.

Lindner therefore wants to ensure a balance, but there are voices from the SPD and Greens that instead call for targeted relief for people with little money.

This is justified by the fact that otherwise high earners would benefit most from tax cuts.

With reference to this, Lindner spoke of a "sometimes class-struggle tone" in the debate.

"The opponents are taking the middle of society hostage because they would like to burden the IT specialist, the heart surgeon and the entrepreneur," he told the "Handelsblatt".

He said that "small and medium incomes would benefit the most in relative terms" from the change he was planning to make to the rate of income tax.

By implementing his plans, Lindner expects a loss of income for the federal government alone in the high single or low double-digit billions.

“I made provision for this measure in the 2023 draft budget,” said the minister.

A counter-proposal by the SPD provides for relief through direct state payments.

According to the “Handelsblatt”, your financial policy spokesman Michael Schrodi calculates in a letter to the parliamentary group that around 90 percent of the population would benefit more from this than from an income tax cut.


Source: spiegel

All business articles on 2022-08-08

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