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Federal Minister of Finance Linder in the Bundestag: Salary increase completely eaten up by inflation
Photo: IMAGO/Frederic Kern / IMAGO/Future Image
According to the Ifo Institute, the state burdened private households by an average of 325 euros more last year with the gradual tax increase due to cold progression.
"That corresponds to 0.7 percent of their disposable annual income," said the economic researchers on Friday in Munich.
»The upper middle class – taxpayers who have around 60,000 euros at their disposal – bore the highest burden in relation to their average annual income.«
With cold progression, taxpayers slide into a higher tax rate for pay rises, even if the pay rise is completely eaten up by inflation.
The state therefore collects more income taxes, although the citizens have less money at their disposal in real terms.
According to the Ifo Institute, the inflation-driven cold progression burdened taxpayers with a total of 10.9 billion euros last year.
In the current year, the new Inflation Compensation Act will almost completely offset the tax burden on households due to the cold progression, said Ifo President Clemens Fuest.
However, it »does not compensate for the remaining tax burden from the inflation of the previous year 2022«.
Ifo tax expert Florian Dorn said: "The cold progression should be automatically compensated for by a tariff on wheels, in which the key values of the tariff zones are adjusted annually in line with the growth in nominal income."
The additional tax burden will primarily affect the middle class and those with higher incomes.
The top 10 percent of earners paid an average of nearly $1,000 more in income tax, or 0.9 percent of their annual income.
mike/dpa
