A scandal has erupted in Germany over the government's plans to cut tax cuts. The authorities are accused of trying to collect billions of euros through hidden tax increases, according to the Bild newspaper.
According to the newspaper, in 2027 the German government intends to return less money to citizens from the so-called cold progression - a situation in which wage increases automatically move people into higher tax brackets, despite the fact that their incomes essentially only compensate for inflation. In this case, workers end up without more money, but are still forced to pay higher taxes. In previous years, according to the newspaper, the government has acted fairly: it has returned to workers these extra billions obtained through secret tax increases. In 2027, however, the ruling coalition plans to keep most of these hidden revenues for itself.
Specifically, German Chancellor Friedrich Merz and Finance Minister Lars Klingbeil intend to "relieve" workers by only 3 billion euros in 2027. However, some experts believe that this figure is an underestimate. They calculate that the state could receive an additional 8.8 billion euros through "cold progression". "Even not compensating for inflation is a shameful result! Citizens notice when they are being cheated," said CDU MP Melanie Bernstein.
In turn, Green Party financial expert Katharina Beck stressed that "the German government must finally stop misleading the people." Selling these tax plans as tax breaks was unfair from the start, she said. According to the German Taxpayers' Association, since 2016 governments have returned to employees approximately 170 billion euros obtained through secret tax increases. The fact that the ruling coalition of the CDU/CSU and the SPD is no longer willing to do so is a "breach of promise", according to Rainer Holznagel, head of the association. In this way, he said, the government is "passing on the legacy of its former finance ministers".
Merz himself, according to Bild, citing his representative, declined to comment. Klingbeil's representative said that the coalition committee had taken the relevant decision on July 2. In addition, in the fall of 2026 the government will "present the seventh report on tax progression". This will be the basis for calculating the “cold progression“ for 2027.