German FinMin pitches $10B tax cuts to ease inflation pain

BERLIN (AP) — Germany’s finance minister said Wednesday that the government plans to make tax cuts worth more than 10 billion euros ($10.2 billion) to benefit broad sections of the population squeezed by high energy costs and inflation.

Finance Minister Christian Lindner said about 48 million people in Germany would profit from changes to the tax system designed to prevent them from being taxed more than their pay increases.

Child benefits will also be raised in the coming years, he said.

The plan was criticized by the Greens, who are part of a three-party governing coalition in Germany along with Lindner’s pro-business Free Democrats. Their representatives have noted that high earners will see the biggest absolute gains from the proposed tax cuts, while those on low incomes will save much less.

But Chancellor Olaf Scholz of the Social Democrats expressed support for the plan.

Scholz’s spokesman, Steffen Hebestreit, said the tax cuts were among a series of measures intended to tackle high energy costs and inflation. “As such I would say there’s general goodwill on the part of the chancellor on this question too,” he said.

Germany’s powerful industry lobby group BDI also voiced support for the plan, saying it was important to avoid pay increases leading to “hidden tax rises” for skilled workers.

Official figures show inflation dipped slightly to 7.5% in July compared to the same month last year, from 7.6% in June. Price rises have been fueled by a sharp increase in energy costs linked to Russia’s attack on Ukraine.

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