Germany’s Grand Coalition Has Provided Tax Relief for Citizens

“Looking at real income development, it was primarily the reduction in the solidarity surcharge that provided relief for many private households. By contrast, the effects of other tax policy measures taken by the German government remained small,” says ifo researcher Maximilian Blömer. The article states that the government’s tax policy has particularly relieved middle and higher earners. Without the federal government’s tax reforms, high earners would have EUR 1,192 less income in their bank accounts. “Low-income households also received relief to the tune of EUR 81, or 0.7 percent, but that was the least compared to the other income classes. The federal government’s tax policy has therefore led to only a mild reduction in inequality and poverty,” Blömer says.

Households with children have also benefited to a relatively large degree from the federal government’s tax policy in the current legislative period. As a result of the tax reforms, the income of couples with children in 2021 is on average EUR 567 higher than without that adjustment. Couples without children have on average just EUR 188 more. The more children who live in the household, the more the couples benefited, the study said. For example, disposable income is now about 1.5 percent higher for couples with one child, while couples with four or more children saw an average increase of 2.4 percent.