The German federal cabinet on Wednesday cleared the way for the income tax reform planned by the government. According to Finance Minister Lars Klingbeil (SPD), the relief volume comes to around ten billion euros, with the focus on easing the burden on small and medium incomes and on families. "We are relieving families with children. We are making sure that a little more is left to live on at the end of the month," Klingbeil emphasised.
Under the draft law adopted by the cabinet on Wednesday morning, the counter-financing is to come above all from an increase in the so-called wealth tax rate, the top rate levied on the highest incomes. Klingbeil himself was unable to attend the cabinet meeting in Berlin because of an aircraft fault. He initially remained in the United States, where he had taken part in talks of the G20 finance ministers.
The cabinet deliberations were accompanied by a dispute between Klingbeil and the economics department headed by CDU minister Katherina Reiche. In a letter, the ministry had criticised the fact that the reform would not fully offset what is known as cold progression, or bracket creep, with the result being an "inflation-driven stealth tax increase". Klingbeil and other SPD politicians reacted with considerable irritation, and the finance minister advised Reiche that she would do better to "do her own homework".
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