Lindner's plans for tax relief: Harsh criticism from Wirtschaftsweiser - "Wrong time"

Created: 08/11/2022 10:38 am

By: Lisa Mayerhofer

Finance Minister Lindner wants to relieve 48 million people in Germany with his tax plans.

But there has been harsh criticism from economists and coalition partners.

Berlin – Minister of Finance Christian Lindner (FDP) presented his new tax plans on Wednesday.

48 million citizens are expected to benefit from next year, with a total of more than ten billion euros at stake.

In addition to an adjustment of the income tax rate, child benefit and the child allowance are also to be increased. 

In percentage terms, low earners will be relieved much more in the proposal than top earners - but in absolute numbers it looks different.

The two coalition partners, the Greens and the SPD, consider this to be socially unbalanced.

Green Group Vice President Andreas Audretsch said: "Tax cuts in the billions, from which top earners benefit three times as much as people with low incomes, ignore reality." 

Economy Veronika Grimm: Lindner's tax plans come at the wrong time

But there is also criticism from experts: According to Veronika Grimm, Lindner's plans are not up to date.

"A reform in which the higher earners nominally gain more comes at the wrong time," Grimm told the

.

In principle it is correct to compensate for the so-called cold progression and to relieve the middle of society in view of the high inflation.

"On the other hand, we currently need relief, primarily for lower and middle incomes, who cannot bear the hardship caused by the price increases on their own," said the member of the Council of Economic Experts for the assessment of overall economic development.

You have to try to relieve lower and middle income groups in a targeted manner, right down to the middle of society.

"Relief with the watering can, such as the tank discount or a reduction in VAT, are not indicated," advised the Erlangen economist.

Tax relief: Municipalities fear tax losses in the billions

Criticism also comes from Marcel Fratzscher, head of the German Institute for Economic Research (DIW).

He described the plans on ARD as "very unbalanced".

"70 percent of this benefits the 30 percent with the highest income," he criticized in the ARD daily topics.

"People on low incomes, who pay little or no income tax, get practically nothing from it." But these people are particularly affected by inflation.

The German Association of Cities, however, warned of tax losses in the billions from Lindner's plans and called for compensation for municipalities.

Chief Executive Helmut Dedy told the German Press Agency that the tax cuts would result in tax losses for the municipalities of around 4.2 billion euros in 2023 and 2024.

"These funds are then missing from the municipal coffers, which are already shaken by the side effects of the Ukraine war and the energy crisis and are facing major budgetary risks."

Lindner himself has defended his plans for tax relief against criticism.

"It's socially balanced," said the FDP leader on Wednesday evening in the ZDF-heute journal.

“The strong shoulders will continue to carry a great burden.

But they are not burdened any more.

And above all, we make sure that inflation doesn't suddenly pay more taxes to people who don't really have broad shoulders.” It's a “pure inflation adjustment”.