Klingbeil tax reform draft draws fire from Taxpayers' Association and Union over net relief and club taxation

Klingbeil's tax reform draft

Finance Minister Lars Klingbeil (SPD) has presented a draft bill for reforming Germany's income tax, aiming to relieve citizens by approximately 10 billion euros gross by 2028 compared with 2026. After counter-financing measures, the net relief amounts to nearly 5 billion euros. The coalition of CDU, CSU, and SPD agreed on basic outlines on 2 July, with the reform set to take effect in two stages in 2027 and 2028. According to the draft, citizens would be relieved by 2.9 billion euros in 2027, with a further 6.99 billion euros following in 2028.

The Taxpayers' Association (Bund der Steuerzahler) sharply criticised the draft. Association president Reiner Holznagel called the plans a "joke or provocation" and said the draft reads like a "poison list" in an interview with the Augsburger Allgemeinen. He objected that no compensation for cold progression, the bracket creep that pushes taxpayers into higher bands through inflation-driven wage increases, is planned. Holznagel also criticised the elimination of a tax allowance for business owners who give up their company in old age or illness, noting that small and medium-sized entrepreneurs had benefited from it.

Key reform details

The draft includes several concrete measures. Kindergeld (child benefit) would rise from 259 euros to 267 euros in 2027 and to 272 euros in 2028. The tax-free basic allowance is set to climb to 12,900 euros by 2028, while the employee flat-rate would increase from 1,230 to 1,430 euros as early as 2027. The top tax rate of 42 percent would apply only from a taxable income of 70,601 euros onward. Rules for tax-free supplements for Sunday and holiday work would be relaxed. Klingbeil has said that by 2028 an average household would have 600 euros more per year.

Counter-financing comes partly through higher taxes on high incomes, including a wealth tax component of around 3 billion euros documented in the coalition agreement since July. The draft also proposes lowering the tax-free threshold for association income from 5,000 euros to 1,000 euros, which the Finance Ministry expects to generate approximately 45 million euros annually. This would not affect small non-profit clubs but would impact economic associations, clubs with significant property holdings, and professional sports clubs.

Coalition friction

CDU top candidate in Mecklenburg-Vorpommern, Daniel Peters, accused Klingbeil of breaking his word, claiming that less than a third of the already modest 10-billion-euro relief remains.

Klingbeil is breaking his word, of the already meagre ten-billion-euro tax relief not even a third remains. We cannot afford this blocking behaviour by the SPD, neither economically nor politically.

CSU Landesgruppenchef Alexander Hoffmann told Bild that anyone seeking to lower tax-free allowances for clubs is targeting the wrong place and hitting those who often lack financial reserves or reinvest them in service to the community. SPD financial policy spokesperson Frauke Heiligenstadt said the draft is still at a very early stage of coordination within the federal government, noting that the coalition had strengthened clubs through a volunteer package last year, including higher allowances for volunteer work and expanded liability privileges.