Child benefit: Cabinet decides on billions of relief for families

More child allowances, higher tax exemptions: The Cabinet has decided on a billion-dollar package to help families with low and medium incomes in particular.

Child benefit: Cabinet decides on billions of relief for families

Every family in Germany is expected to have 200 euros and more in ir pockets from next year: This is a draft by federal finance Minister Olaf Scholz (SPD), which cabinet has now decided to adopt. A family with a gross annual salary of 60,000 euros will be relieved by 9.36 percent from 2019, which means 251 euros more per year. In total, legislative package saves families 9.8 billion euros.

Specifically planned are a child benefit increase of ten euros per month from July 2019, a higher basic allowance in tax and additionally a higher child allowance. In addition, re is a relief of middle and bottom income in so-called cold progression.

High tax revenue 2017 make it possible

Even higher incomes are somewhat relieved. In case of a family income of 120,000 euro gross, discharge should amount to 380 euros per year – that is 1.8 percent savings compared to 2018. Due to high tax revenues, which are a result of continued good current economic situation and low unemployment figures, Scholz had announced additional reliefs in income tax.

Overall, "cold progression" is to be reduced by 2.2 billion euros in coming year, this sum is included in total relief of 9.8 billion euros for 2019 – and not only affects families. 2020 amount of discharge shall n be EUR 2.1 billion. The problem of "cold progression" arises when income and wage increases only offset inflation, that is, price of products, but purchasing power hardly increases. By rate of income tax, you pay disproportionately more taxes to Treasury – quasi a creeping tax increase.

In calculation of relief, Government assumes an inflation rate of 1.84 percent (2019) and 1.95 percent (2020). The basic allowance for taxpayers is expected to rise from 9,000 to 9,168 euro (2019) and 9,408 euro (2020), and maximum amount for deduction of maintenance payments is expected to rise slightly.

The child allowance should be increased from 7,428 to 7,620 euro (2019) and 7,812 (2020). In a second stage, child benefit is to increase by a total of 25 euro per month according to coalition agreement until 2021. The second increase of 15 euros is planned from January 2021. However, some of reliefs are required by law anyway. The basis for this is minimum subsistence report, which, for example, sets level of tax exemptions.

Reliefs still go beyond coalition agreement

The Union and SPD had agreed on tangible relief in coalition agreement, but some measures are still going furr. This is linked to rising tax revenues. Up to 2022, federal government, Länder and municipalities can expect up to 63.3 billion euros more in revenue, as latest tax estimate in May. "Families keep our society toger. To strengn and relieve m is our goal, " union and SPD had written in coalition agreement.

Date Of Update: 27 June 2018, 12:01

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