Germany proposes tax relief for low and middle-income earners

The German federal government has proposed a tax reform aimed at providing relief to low and middle-income earners starting in 2027. The draft law, proposed by Finance Minister Lars Klingbeil, seeks to reduce the tax burden by approximately ten billion euros through a two-phase implementation.

Key measures include increasing the basic tax-free allowance. In 2027, the allowance is projected to rise to 12,564 euros, followed by an increase to 12,900 euros in 2028. Additionally, the highest tax rate of 42 percent would only apply to taxable income exceeding 70,601 euros starting in 2027. To fund these relief measures, a new 47 percent tax rate is proposed for high earners with incomes above 280,000 euros, while the existing 45 percent rate would be applied to incomes starting from 250,000 euros.