For years, most employees have withheld more of their net income than their gross income. Currently, more tax cuts don't make much sense.
Lindner's unnecessary tax donations put pressure on the budget Photo: Ann-Marie Utz/dpa
The new tax reduction that Federal Finance Minister Christian Lindner is planning is unnecessary. Contrary to the impression given by the FDP politician, taxpayers have done well in recent years. Between 2021 and 2023, most employees withheld more net of their gross income because, for example, the basic tax relief increased and the overall income tax rate was adjusted. So the work was more worth it than before.
And the secret tax increases of the so-called cold progression were more than offset. This effect will continue in 2024. It can now be argued that the high inflation of recent years has not been fully offset for many private households. True, but this loss of purchasing power is likely to reduce gradually. For one thing, price increases have now returned to the comparatively low level of just over two percent.
On the other hand, wages are likely to continue growing significantly for some time. In fact, there is no need for new tax cuts in 2025 and 2026. So why? It serves as an argument before the 2025 federal elections to win votes for the FDP. And it includes a political strategy. Tax cuts cost the government money that is not available for other purposes.
Lindner is thus increasing his influence to enforce other aspects of his financial policy, such as limiting social spending. A further reduction in income tax would also have economic advantages. Ultimately, greater private demand could cushion economic stagnation. But that is not the crucial point now. In terms of economics and financial policy, there is currently a lack of public demand and investment.
In the wake of the Russian war and for the transition towards climate neutrality, the State needs large sums of money. Wasting scarce resources on tax donations does not do justice to the seriousness of the situation.