Germany’s Finance Minister Promises Tax Cuts Worth $25 Billion

(Bloomberg) -- German Finance Minister Christian Lindner announced plans for €23 billion ($25 billion) in income-tax relief for households through 2026 even as he wrestles with his coalition partners over how to plug a hole in next year’s budget.

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The proposal includes increasing the tax-free allowance for low earners, as well as lifting earnings brackets to offset the effect of inflation as workers are pushed into higher tranches under the country’s progressive taxation system.

The Free Democrat finance minister’s plan to forgo billions in revenue comes during tough budget negotiations with his Social Democrat and Green partners in government. The shortfall for 2025 is estimated at around €20 billion.

Lindner has imposed austerity on all ministries except defense and is resisting pressure from Chancellor Olaf Scholz and Economy Minister Robert Habeck to suspend the country’s constitutional limit on debt to allow for the cost of providing military support to Ukraine following Russia’s invasion.

Katharina Beck, a finance policy expert for the Greens, expressed skepticism about Lindner’s plans given a budget shortfall next year she pegged at €25 billion.

“In this context, bringing general tax cuts amounting to double-digit billions into play can’t be taken seriously,” she was quoted as saying by Welt newspaper.

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