The IDEA Foundation has weighed in on the current debate over adjusting the tax table to inflation, stating that the government should tread carefully in this matter. On Monday morning, the Minister of Finance Yuriko Backes argued that adjusting the tax table to inflation would “not be responsible” at the moment.
Bracket creep is usually defined as the process by which wage indexations pushes wages and salaries into higher tax brackets, meaning that people have to pay more taxes. The IDEA Foundation, which was established by the Chamber of Commerce in 2014, argues that adjusting the tax table to inflation will mainly benefit those with high incomes, which would result in a significant loss of tax revenue for the state.
The think tank estimates that such a measure will cost the state around €96 million per wage indexation. According to the IDEA Foundation, this money could instead be used to finance targeted measures that benefit those with lower incomes or to address structural challenges such as the climate crisis or the energy transition.
“Especially in times of multiple crises, we should think carefully before using up financial leeway,” the think tank says, concluding that “it is essential to wait before taking a decision.”
