The cold progression hits Germany with full force. Taxpayers in Germany are expected to pay around 20 billion euros too much income tax this year. The federal, state and local governments should be happy about the increased income. Finance Minister Lindner has already announced that he intends to fully compensate for the cold progression.
The Germans will pay 20 billion euros too much in taxes this year. This is shown in a draft report by Federal Finance Minister Christian Lindner (FDP), quoted from “Welt”. According to this, taxpayers in this country would pay billions more in income tax because of the so-called cold progressions. The indirect tax increase is due to higher wages as a result of inflation – without them being able to buy more with the money, because they slide into a higher tax bracket.
The report states: “In 2022, around 35.5 million taxpayers with an average of around 659 euros per year will be affected by the cold progression on an individual level.” That is more than previously expected. Specifically, the Germans would pay 20.4 billion euros too much income tax this year, and next year it is expected to be 21 billion euros.
On Thursday afternoon, Lindner wants to present the current forecasts of the working group on tax estimates. Accordingly, the federal, state and local governments can expect additional income. On the one hand, many people are subject to income tax due to the stable, low unemployment rate. On the other hand, the state also benefits from inflation, because higher prices lead to higher sales, which have to be taxed.
Finance Minister Christian Lindner has already announced that he will “fully compensate for the cold progression based on the tax progression report.” In principle, the coalition has already decided to update the relevant law. “The state should not keep any inflation-related additional income,” emphasized the FDP politician.
In order to reduce the cold progression , the basic allowance is usually increased and the other key values of the income tax rate are also shifted. Lindner has already announced that the tax-free allowance will increase to EUR 10,908 in the coming year. In 2024, the tax-free allowance for around 48 million taxpayers is to be increased again.
