Who will benefit from tax cuts
When it comes to taxes, many people switch off - too complicated, they think. But behind the tax news there are important messages hidden: who will have more money available in the coming year, in which there will be some social and tax policy changes, and who will not?
In the current year, the German tax authorities are collecting around 696 billion euros in taxes, which is again a solid increase compared to the previous year. And in the coming year, revenues will continue to grow. So much for the good news from the federal government. How calculations by the Berlin tax professor Frank Hechtner for the Southgerman newspaper show, they do not necessarily translate into good news for every single German citizen. On the contrary: things will not always look better in private wallets in 2017 than in 2016.
Higher social contributions compensate for tax relief
Federal Finance Minister Wolfgang Schäuble (CDU) wants to forego two billion euros in 2017 in favor of taxpayers. But in relation to the individual employee, in the end there is often less left over than expected. In addition, employees whose salaries are above the new income threshold will even have less money available - especially if they have no or adult children and live in East Germany. "A not insignificant part of the tax relief is consumed by higher social contributions," says Hechtner, who teaches at the Free University of Berlin.
So the tax relief next year will not be enough to let all taxpayers benefit from it. The relief is diminished by the increase in contributions to long-term care insurance. There is another negative effect for those earning higher incomes. Not only is long-term care insurance becoming more expensive for them, but contributions to pension, health and unemployment insurance are also increasing. The reason for this is the rising contribution assessment limits. These are the upper limits up to which employees have to pay social security contributions. Earnings that go beyond this remain exempt from the tax.
Those who earn a lot and have no children will be able to spend less in the future
In the coming year, the increase in the contribution assessment ceilings will primarily affect high-earning employees in eastern Germany. From 2017 onwards, you will have to pay pension and unemployment insurance contributions up to a gross salary of EUR 5700, previously this limit was EUR 300 lower. The upper limit for contributions to health and long-term care insurance is also increasing, if only by 112 euros to 4350 euros.
Tax professor Hechtner has calculated that practically all employees in the new federal states who are childless and whose salary affects or exceeds the new upper limits will be able to spend less money in 2017. Couples that are assessed together and in which one of the partners earns around 5750 euros gross, the other only contributes 250 euros per month, will have to pay around 238 euros annually in 2017.
East German couples with children are less affected by the increased income threshold, but the table below shows that practically all employees with salaries above 5700 euros will have to reckon with losses.
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