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Economic methods criticize reduction plans for parental allowance

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Economic methods criticize reduction plans for parental allowance

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Economic methods criticize reduction plans for parental allowance

As of: 9:53 p.m. | Reading time: 2 minutes

The members of the Council of Experts Ulrike Malmendier (lr), Martin Werding, Monika Schnitzer (chair), Achim Truger and Veronika Grimm (archive picture)

Source: pa/dpa/Bernd von Jutrczenka

Family Minister Lisa Paus (Greens) wants to save on parental allowance. She gets criticism for this from the economists. The Council of Experts demands that financial privileges for single-earner marriages should rather be reduced.

The economic experts have criticized the planned abolition of parental allowance for citizens with high incomes by Family Minister Lisa Paus (Greens). In a guest post for theFrankfurter Allgemeine ZeitungThe German Council of Economic Experts calls for financial privileges for single-earner marriages to be reduced instead. “Both income taxation and social security regulations have provisions that reduce the second earner’s contribution to household income or that make employment appear less rewarding,” they write.

The lower employment incentives for second earners – mostly women – are not only problematic because of the lack of social security. Because of the shortage of skilled workers, incentives to work are also important for the economy as a whole. The independent council of experts for assessing overall economic development advises the federal government.

The economists consider lowering the income limit for parental allowance to be counterproductive. After the introduction of parental benefits, significantly more women with higher incomes and higher levels of education had children, they argued. In addition, the fathers participated more frequently in childcare. Instead, the experts advocate a reform of spouse splitting. They criticized that it currently reduces the incentive to take a job as a second earner or to increase the number of hours.

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Parental Allowance Plans

So far, parental allowance has been given to couples whose joint taxable income is less than 300,000 euros. Because of the savings requirements of Finance Minister Christian Lindner (FDP) for the federal budget for 2024, Family Minister Paus wants to lower the limit to 150,000 euros. SPD leader Lars Klingbeil had suggested as an alternative that marriage splitting for new marriages should be abolished – but FDP leader Lindner rejected this. Chancellor Olaf Scholz (SPD) put his party leader’s proposal into perspective and emphasized that nobody was planning to make things worse for “normal earners”.

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With spouse splitting, the joint income of a couple is halved, the income tax due is calculated and the tax liability is then doubled. This is particularly useful for couples where one earns a lot and the other a little.

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