Federal Finance Minister Christian Lindner has defended his plans to reduce the so-called cold progression in income tax against criticism from the coalition partners SPD and the Greens. At the same time, the FDP leader announced that he wanted to leave the limit for the maximum rate of income tax unchanged. "Unlike my social democratic predecessor, I would not change the basic value of the tax on the wealthy," Lindner told the "Handelsblatt".
The taxes increase the higher the income – the top tax rate is 42 percent. For top earners, however, there is still a maximum rate of 45 percent, the so-called rich tax. It currently applies to taxable income of just under EUR 278,000.
Cold progression is a kind of creeping tax hike, when a pay rise is eaten up by inflation but still results in higher taxation. Politicians from the SPD and the Greens had criticized that Lindner's plan to eliminate this effect primarily supported the highest earners.
The Minister of Finance opposed this. "The opponents are taking the middle of society hostage because they would like to burden the IT specialist, the heart surgeon and the entrepreneur," said Lindner. He regrets the "at times class-struggle tone in the debate". Lindner also countered the criticism of his coalition partners and referred to the comparison to the overall tax burden. “Small and medium incomes benefit the most in relative terms from a change in the tariff curve.”
According to the report, the Minister of Finance is assuming a high single or low double-digit billion contribution in his proposal for a lack of revenue for the federal government. "In the draft budget for 2023, I made provision for this measure," he said.
