Increase in the basic allowance
Lindner promises tax relief this year
March 30, 2024, 8:16 a.m
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There is a gap in the budget in the double-digit billions. Lindner is calling for more austerity from numerous ministries. Nevertheless, the finance minister sees scope for tax relief. He is also planning relief in the coming years to compensate for the cold progression.
Finance Minister Christian Lindner wants to provide tax relief for millions of citizens this year. Citizens’ money was increased “massively and disproportionately” on January 1st due to the high inflation expectations. The FDP leader said that this must also retroactively lead to an increase in the basic allowance for wage and income tax. “We are preparing this in the legislation. This means that there will be further tax relief for the working population in the current year.”
Lindner also promised changes to income tax for 2025 and 2026. Then the so-called cold progression must be balanced out again, he said. This refers to the effect of high inflation on income tax, which would ultimately lead to a secret tax increase. “If we did nothing, then people who get a salary increase that barely compensates for inflation would face a greater tax burden,” explained the finance minister.
The federal government most recently responded to high inflation for the years 2023 and 2024. Further compensation must be discussed in the context of the budget draft and financial planning, Lindner announced. Financial details will only be known in the fall, when a new progress report is available.
As a rule, to compensate for the cold progression, several adjustment screws in the tax tariff are adjusted: the basic tax allowance, i.e. the income up to which no tax has to be paid, and also the limit above which the top tax rate of 42 percent is due. Budget discussions for 2025 are currently underway in the federal government. Financial leeway is tight: even without tax relief, there is already a gap in the double-digit billions that needs to be closed.