German Finance Minister Klingbeil's Tax Reform Targets 35 Million Taxpayers

Finance Minister Lars Klingbeil (SPD) has presented two income‑tax reform packages for the coalition. Both aim to ease the burden on low‑ and middle‑income earners – roughly 35 million people – by cutting annual taxes by €800‑€900 for those earning €40 000‑€60 000. The larger package would deliver about €28 billion in relief and relies on counter‑measures such as higher inheritance tax and a modest increase of the Spitzen‑(top) tax rate from 42 % to 44 % starting at €76 508 taxable income. The smaller package offers roughly €17 billion in relief and foregoes the inheritance‑tax change. In both proposals the “rich‑tax” would begin at €200 000, raising the rate to up to 49 %. Funding gaps are also discussed, with the Union (CDU/CSU) urging savings, a possible modest raise of the rich‑tax, or a higher VAT as alternative revenue. Coalition partners are negotiating how to balance the relief with financing, while Union leaders warn against a “pure redistribution” that could hurt the Mittelstand and handwerk sectors. Former minister Roland Koch has suggested the Union accept compromises on the rich‑tax in exchange for labour‑market flexibility. The reforms are slated for discussion at the coalition summit on 1 July, with the final package to be presented to the cabinet thereafter.