Cold progression: taxpayers lose despite salary increases!

Cold progression: taxpayers lose despite salary increases!

Hagen, Deutschland - The cold progression, an often overlooked effect in the German tax system, brings current discussions about tax burdens in the Federal Republic of new explosiveness. The former traffic light government had announced a comprehensive tax package to alleviate the negative effects of the cold progression. This happened against the background of the increased inflation, which in 2022 shot down due to the energy price crisis as a result of the Ukraine War. The inflation rate reached almost nine percent, which led to an increase in the tax burden.

like the Frankfurter Rundschau in 2022 was imposed on a burden of 10.9 billion euros. Progressive taxation in Germany is particularly striking, which means that wage increases are significantly reduced by inflation and tax adjustments. An example illustrates this: a single taxpayer in tax class I, which has a gross income of 3,500 euros and receives a salary increase of three percent, only retains 57.43 euros net - despite the nominal increase of 105 euros.

tax burdens and compensation measures

The cold progression is not only problematic for individuals, but also affects families and single parents who are increasingly taxed compared to their real increase in income. Calculations of the IFO Institute suggest that most employees will have less money in their pockets in 2025. Families and single parents in particular have to expect an additional burden: a single with a gross income of 100,000 euros will have to pay 863 euros more, a family with 130,000 euros is faced with an additional load of 731 euros, while single parents should pay 568 euros less.

The Bundestag has now received the sixth tax progression report of the Federal Government, as reported Bundesag.de . This report is of central importance to compensate for the effects of the cold progression. It shows that around 35.1 million taxpayers will be affected in 2024, with an average burden of around 273 euros. The report puts the effects of the cold progression at 9.6 billion euros for 2024 and 7.9 billion euros for 2025.

As early as December 2022, the inflation compensation law was passed to adapt the tariff structure in income tax for the years 2023 and 2024. For the future relief, the tax continuing development law also provides regulation of the cold progression. Federal Finance Minister Christian Lindner, based on the new data, demands a higher relief for citizens to cushion the financial cliffs caused by the cold progression.

-transmitted by West-Ost-Medien