Germany Unveils €23 Billion Tax Cut Package to Combat Inflation

The German coalition government has announced a €23 billion tax cut package aimed at easing the burden of inflation on households. The plan, spearheaded by Finance Minister Christian Lindner, will primarily increase income tax thresholds to reduce fiscal drag, a phenomenon where inflation pushes workers into higher tax brackets despite wage increases.

The tax cuts, estimated to be worth around €430 for each working adult, will be implemented in three stages over the next two years. However, the move has drawn criticism from Lindner's coalition partners, the Greens and Social Democrats, who argue that it will strain the already tight budget.

Germany is potentially facing a budget deficit of €20-25 billion or more for the next year, and Lindner has been particularly strict on debt levels for most ministries except defense. Critics argue that tax cuts will further erode government revenue and exacerbate the budget issue.

Despite the backlash, Lindner defends the decision as necessary to adjust the tax system to reflect the current inflationary pressures on citizens. Unlike some other countries, Germany's tax system does not automatically adjust for inflation.