Fighting High Prices: Traffic Light Decides on Billions in Relief

fight high prices
Traffic light decides billions in relief

With a package worth billions, the Traffic Lights Alliance relieves citizens of rising energy prices and increasing costs of living. State aid will be increased for people who have particularly little money. There are also tax exemptions.

The Bundestag agreed to part of the relief packages for the citizens. The background is the high prices for heating, driving and in the supermarket. Specifically, it is about measures worth billions aimed at ensuring that citizens pay less taxes. Those who have a long trip to work benefit in particular. Finance Minister Christian Lindner had already argued during the first debate in Parliament that relief should dampen “expected inflation”. Every citizen should feel that the state exempts him. This is important to prevent a dangerous wage and price spiral that could lead the entire economy into stagflation, that is, a combination of price hikes, economic stagnation and unemployment.

The deal does not go far enough for the opposition. The union criticized that the basic premium was not raised sufficiently. In addition, the money will reach citizens too late, that is, after the 2022 tax return next year. The government must act faster, especially when it comes to cold progress. This is a kind of creepy tax increase, when the entire salary increase is devoured by inflation, but still leads to higher taxes.

The following measures are included in the package:

  • The basic provision for income tax will be increased from the current €9,984 to €10,347. As a result, all taxpayers are required to pay lower income tax – retroactively from January 1 this year.
  • The fixed price for advertising expenses will be increased. They are automatically taken into account on the tax return of all employees if they do not report expenses related to higher incomes themselves. So far, taxable income can be reduced by 1,000 euros, and in the future it will be 1,200 euros.
  • Long-haul travelers get a higher transportation allowance. Long-distance travelers are citizens who must travel 13 miles or more to get to work. Retrospective to January 1, they can calculate 38 cents per kilometer, which is three cents more than before. However, this should only apply until 2026.

Traveler’s allowance is the portion of income-related expenses on your tax return. However, long-haul travelers usually get a little more than the lump sum, so they directly benefit from the increase. The coalition stresses that those who have to travel much fewer distances will also be exempted through the higher flat rate income tax benefits.

However, the traveller’s allowance is controversial, especially among the Greens. Although he can also be credited with train or bike trips, they see it as a promotion for car traffic. Therefore, the coalition agreed to reorganize the total amount in this legislative period and to take better account of environmental and social considerations.

Finance Minister Lindner will lose around €4.46 billion in tax revenue this year alone due to the tax break – money that citizens also have in their wallets. By 2026, the costs will reach about 22.5 billion euros.

In addition to tax measures, the Bundestag has also decided to provide assistance to people who have little money, and who especially suffer from high heating and driving costs, for example.

  • Children, adolescents and young adults affected by poverty will receive an immediate bonus of €20 per month from July.
  • Families whose income is not enough or just enough can get 229 euros per child from the state instead of 209 euros, in addition to the child benefit.
  • Adult beneficiaries, such as recipients of Hartz IV or unemployment benefit II, receive a one-time payment of €200 to meet the rising cost of living.
  • Everyone who receives unemployment benefit receives a benefit of 100 euros. Funds must also be paid in July.

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