A group of leading economists has proposed a far-reaching reform of Germany’s Ehegattensplitting system, arguing that the current model no longer reflects modern economic realities. The proposal would replace unlimited income splitting with a capped transfer model while directing more support towards families with children.
The economists believe the changes would strengthen work incentives, help address labour shortages and create a fairer distribution of tax benefits. Rather than eliminating tax recognition for marriage altogether, they want to modernise the system while maintaining support for married couples.
The recommendations come as Germany is already debating the future of Ehegattensplitting. The federal government is also considering reforms to the current joint taxation system, including a model that would replace unlimited income splitting with a capped transfer mechanism between spouses. The economists’ proposal adds a detailed blueprint to the ongoing discussion and could influence the direction of future tax reforms.
The reform proposal was initiated by Nicola Fuchs-Schündeln, president of the Berlin Social Science Center (WZB), Monika Schnitzer, chair of Germany’s Council of Economic Experts, and Katharina Wrohlich, head of the Gender Economics Research Group at DIW Berlin. The initiative is also supported by prominent economists and policy experts, including ifo Institute President Clemens Fuest, DIW President Marcel Fratzscher and economist Andreas Peichl.
The proposal is part of a broader open letter signed by leading economists, researchers and public policy experts calling for a modernisation of Germany’s Ehegattensplitting system.
The economists' recommendations go beyond a simple adjustment to the current system. Instead, they have presented a comprehensive reform package designed to modernise Germany’s tax framework while maintaining recognition for marriage.
The central element of the proposal is the replacement of the current unlimited splitting model with a capped transfer system. Under the proposed framework, a maximum of €13,805 could be transferred annually between spouses for tax purposes. The higher-earning spouse would be allowed to deduct this amount from taxable income, while the receiving spouse would be required to declare it as taxable income.
According to the economists, this approach would preserve the principle that marriage should receive tax recognition while significantly reducing the largest tax advantages currently available to couples with substantial income differences.
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A second major component of the proposal involves redirecting the savings generated by reforming Ehegattensplitting towards families with children. The economists argue that government support should focus more strongly on households that bear the financial costs of raising children rather than on marital status alone.
According to the proposal, monthly child benefit (kindergeld) payments could increase from €259 to €316 per child. The economists also recommend increasing child-related tax allowances as part of a broader effort to strengthen support for families. Rather than generating additional revenue for the state budget, the reform is intended to redistribute resources towards families with children.
The economists believe the current Ehegattensplitting system can weaken financial incentives for second earners to increase their working hours. Nicola Fuchs-Schündeln has argued that Germany must make better use of the employment potential of highly educated women, particularly in light of demographic change. She has also stressed that people are more likely to increase their working hours when doing so is financially worthwhile.
The group estimates that the stronger work incentives created by the reform could generate the equivalent of around 49,000 additional full-time jobs. Supporters argue that this would help address labour shortages while increasing workforce participation.
Recognising that many households have organised their finances around the current tax system, the economists also support transitional measures. These protections are intended to ensure that couples who have relied on Ehegattensplitting for many years are not suddenly confronted with major financial changes. The proposal therefore aims to balance reform with predictability for affected households.
The economists argue that Germany’s current marriage taxation system no longer reflects modern economic and labour market realities. As per the proposal, the existing system rewards households with large income differences because the greatest tax benefits are generated when one spouse earns substantially more than the other. Critics believe this can discourage the lower-earning partner from increasing participation in the labour market.
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The economists also argue that tax benefits linked to marriage should not take precedence over support for families raising children. They believe public resources can be used more effectively by focusing assistance on households with children rather than primarily rewarding differences in spousal income.
By reforming Ehegattensplitting, they hope to create a system that better supports families, encourages employment and reflects the needs of today’s economy.
Under the existing Ehegattensplitting model, the incomes of both spouses are combined and divided equally for tax calculation purposes. The resulting tax liability is then doubled to determine the couple’s final tax bill. Because Germany uses a progressive income tax system, this calculation often reduces the overall tax burden for couples where one spouse earns significantly more than the other.
As a result, households with large income differences can receive substantial tax savings compared with couples whose incomes are more evenly distributed. Supporters argue that this reflects marriage as an economic partnership and recognises shared financial responsibilities. Critics, however, say the system disproportionately benefits certain households while doing little to support families directly.
Families with children are expected to be among the biggest beneficiaries of the economists’ proposal. According to the group's calculations, couples with children would benefit from the reform by an average of €585 per year, while single parents would receive average relief of €417 annually. The economists believe the reform would create a fairer distribution of public resources by directing more support towards families that face the financial costs of raising children.
The households most likely to lose under the proposed reforms are childless married couples with large income differences. Childless couples with unequal incomes would pay an average of €316 more in taxes per year under the proposed model. These households currently receive some of the largest benefits from Ehegattensplitting. Introducing a cap on transferable income would reduce those advantages and could result in higher tax liabilities compared with the current system.
As Germany continues to debate the future of joint taxation, the economists’ recommendations are likely to play an important role in shaping the discussion. Whether policymakers adopt the proposals remains uncertain, but the reform debate has firmly returned to the centre of Germany’s tax policy agenda.
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