One of the longest-standing pillars of the German tax system is back at the center of political debate and risks falling under the axe of the so-called summer of reforms proclaimed by the government. The Social Democrats, the junior partner in the coalition, are considering a profound revision of marital splitting (Ehegattensplitting), the mechanism that allows married couples to be taxed as a single economic unit. Vice Chancellor and Finance Minister Lars Klingbeil has outlined a reform aimed at significantly downsizing the tax benefit currently guaranteed to spouses, replacing the current model with an alternative system that promises to substantially modify the balance between family policy and taxation.
AT THE ROOT OF THE TAX REFORM
Within the SPD, Ehegattensplitting has long been the subject of criticism. The mechanism calculates tax based on the average income of the partners, favoring especially couples where one earns significantly more than the other. A similar model exists in other European countries, such as the French family quotient, but in Germany the system has become a symbol of a tax approach considered by the left (the Greens are also strong opponents) no longer adequate to social changes.
When Klingbeil evoked the end of marital splitting during his recent programmatic speech at the Bertelsmann Foundation, the public reaction was immediate. His party welcomed the initiative, while criticism came from political and social circles that interpreted the proposal as a possible weakening of marriage on the fiscal level.
As days passed, the contours of the reform emerged more clearly through a document from the Federal Ministry of Finance revealed by the media. The goal would not be a pure and simple cancellation of the tax benefit, but rather its transformation into a new model called “real splitting,” designed to maintain a tax advantage but in a more limited form and less tied to specific family models.
HOW THE NEW MODEL WOULD WORK
The economic daily Handelsblatt explains to confused German readers how the new model would work. The proposed system would allow partners to transfer a limited share of income between each other, thus optimizing the overall tax burden. The technical reference would be the maximum maintenance amount already provided for divorced or permanently separated spouses, equal to 13,805 euros. This sum could be deducted by the partner with higher income and taxed by the partner with lower income according to their own rate.
According to the ministry, “the new scheme would allow couples to continue benefiting from a tax relief, but only to a limited extent.” The advantage currently particularly significant in households with large wage differences would therefore be reduced, while couples with similar incomes would experience substantially unchanged effects.
Klingbeil’s declared intention is also to mitigate the work disincentives associated with the current system, often cited as one of the factors influencing occupational choices within families.
THE IW COLOGNE SIMULATION
Economic simulations, however, show possible concrete effects on family finances. According to calculations by the German Economic Institute (IW), a single-income couple with annual earnings of 100,000 euros could end up paying about 4,000 euros more in taxes compared to the current situation. An element that fuels the political and media debate around the reform.
HANDELSBLATT: FAMILIES AT RISK OF TAX HIKES
The economic daily Handelsblatt highlighted how the project is interpreted by some as a step towards greater gender equity and increased workforce participation, while others fear it could mainly translate into higher tax pressure on families. In the public debate, marital splitting continues to deeply divide political and social opinion and, according to the Düsseldorf newspaper’s judgment, “the abolition of marital splitting primarily results in an increase in tax pressure for all families in Germany.”
Thus Klingbeil risks falling into a trap set by himself. The Social Democratic leader could in fact end up further burdening precisely those family units that already bear the greatest burdens within society. Instead of going down in history as the promoter of greater equality – concludes Handelsblatt – Klingbeil risks being remembered as the architect of a heavy tax increase for families, a prospect that could plunge the SPD towards single-digit electoral percentages.
WILL MERZ YIELD ONCE AGAIN TO THE SPD?
Now decisive will be the position of Chancellor Friedrich Merz and the conservative coalition partners. Within the Union group formed by CDU and CSU, opinions remain divided: while Family Minister Karin Prien has expressed support for a revision of the system, large conservative sectors remain opposed to ending the tax privilege for spouses. Joint tax declaration for spouses does not constitute an exception to tax rules or an employment incentive, but rather the recognition of a legal principle: the mutual duty of economic support between partners.
Marital splitting does not exhaust its relevance in the tax field but involves socio-political and constitutional profiles. Maintaining the duty of mutual support while eliminating the related tax benefit risks – according to opponents – generating legal issues. Therefore, conservatives warn, any suppression of this mechanism would effectively require a structural revision of social legislation as well.
