Econintersect: German’s won’t see any of it until 2013, but an agreement has been reached by a coalition in the German government to reduce personal income taxes by €6 billion over a period of two years. There had been bitter wrangling over the tax cut issue between the three center-right ruling coalition parties (named below). The opposition Social Democrats indicated that they could still block the tax cuts if laws limiting the growth of debt were broken. (Photo: German Chancellor Angela Merkel.)From Reuters:
Leaders from Chancellor Angela Merkel’s Christian Democrats (CDU), their Bavarian sister party the Christian Social Union (CSU) and junior coalition partner the Free Democrats (FDP) agreed to cut income taxes by 2 billion euros in 2013 and 4 billion euros in 2014.
As a compromise, the tax cuts would also be linked to an increase in contributions to social insurance, higher investment in road construction, simplified recruitment of foreign skilled labour and money for those caring for babies.
The Daily Mail characterized the tax changes as small, but quoted Chancellor Merkel as saying the cuts would be Germany’s part of strengthening “forces of economic growth in Europe.” From the Daily Mail:
The move, which will be seen as small but symbolic, is aimed at easing the burden on lower and middle income Germans.
The coalition plans to make changes to German tax brackets, especially rules that now lift a taxpayer into a much higher bracket with even a small increase in earnings.
Legislation introducing the cuts must still be approved by parliament.
Mrs Merkel said her government would continue to reduce the nation’s deficit, but at the same time felt compelled to give something back to citizens.