Germany's Finance Minister Lars Klingbeil (SPD) has outlined ambitious plans to strengthen the country and its labour market through the abolition of spousal income splitting, longer working lives, and comprehensive income tax reform. "We will have to work more as a society overall," he said on Wednesday during a keynote address at a Bertelsmann Foundation event.
With his statements, Klingbeil also touched upon core Social Democratic themes, demonstrating willingness to reform in alignment with Chancellor Friedrich Merz (CDU) - while distancing himself from the CSU. "I want to open doors with my speech regarding future reform processes in our country," Klingbeil said at the outset.
He also expressed conviction that this would not only succeed together with the Union parties, but that people in the country also understood that this would mean impositions. He drew no red lines - unlike CSU leader Markus Söder, who recently issued a clear rejection of a higher top tax rate.
Klingbeil made clear that incentives for additional work through tax reforms were important. He wants the so-called joint taxation to be abolished "in its current form" for future marriages. He wanted to "eliminate a disincentive that especially keeps women trapped in part-time work," he said, describing it as a "system from the last century." A reform could create tens of thousands of full-time positions.
Spousal income splitting rewards married couples with large income differences through tax benefits. The greater the difference, the higher the tax advantage. This leads to lower-earning partners having less incentive to work - and these are usually women. The current problems in the German labour market were "obvious," Klingbeil said - there are high part-time rates, incentives for early retirement, and transfer systems that create no incentive for additional work.
Willingness to work must pay off, Klingbeil said. He could also envision creating extended fixed-term employment possibilities so that companies would dare to "invest in a phase of uncertainty" and hire more people. Furthermore, accelerated professional recognition and work permits after three months for asylum seekers must now "come quickly."
The Vice Chancellor simultaneously emphasized that work must also become more attractive in professional life. To this end, he announced an income tax reform with the goal of relieving 95 percent of employees. He did not mention details such as income thresholds or tax rates, but ultimately it would have to involve relief of "several hundred euros per year." The whole thing must also be financed: "For me, it is completely clear that high incomes and high wealth will make a contribution to this."
As part of the reforms, Klingbeil also considers a longer working life. He supports the proposal "that we orient ourselves much more strongly towards contribution years when it comes to pensions," he said. Linking pensions to contribution years would primarily mean a later retirement age for academics. He further supports "that we stop promoting earlier exit from working life." He would find it "more sensible if we promoted longer working," Klingbeil said. This is likely to lead to resistance from his own ranks.
Klingbeil also prepared citizens for "difficult and uncomfortable decisions" surrounding budget planning for the coming years. In recent years, the state has "taken hundreds of billions into its hands to cushion the effects of crises." This will no longer work that way. The state does indeed have a protective function and will continue to exercise it. However: "We cannot simply answer every crisis and every problem with even more money."
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