The head of household has given his consent.
Historical experience with spending, bartering and debates – but now the new federal budget is here. The mid-July peace break had to be tightened due to the risk of constitutional violations. Now the time has come. The SPD, Greens and FDP leaders theoretically agreed last Friday. The new budget has now been submitted to the Bundestag. Here is a summary of the document:
Rely on unused resources
Despite the agreement, there is still a deficit in the budget. The overall under-utilization is 12 billion euros – larger than the federal government originally intended. They are hoping that ministries will not spend their full annual allocation. That has happened in recent years, leaving billions left over. However, a deficit of this magnitude is unusual.
The coalition government plans to spend around 490 billion euros next year, about 10 percent of which will be on credit. However, this is not set in stone, as the federal budget depends on the decision of parliament. Budget holders in the Bundestag usually make modifications before the decision is made, often reversing some of the cuts proposed by the government.
Key figures from the draft budget
The budget for next year is estimated at 488.6 billion euros, around 300 million euros less than this year. The Finance Ministry has allocated 81 billion euros for investments – a record high. Finance Minister Christian Lindner plans to borrow an additional 51.3 billion euros, slightly more than this year. This can be done within the debt limit under the Basic Law.
The coalition wants to use its budget to stimulate the sluggish economy, maintain social services, reduce the tax burden and deal with the tense international security situation. The largest expenditure item is the social budget with a planned 179 billion euros, mainly for legally guaranteed benefits such as the citizen’s allowance.
Does the Bundeswehr receive enough funds?
Defense Minister Boris Pistorius will receive additional funds, allowing Germany to exceed NATO’s target of 2 percent of GDP. The defense budget is set at 53.25 billion euros, an increase of 1.3 billion euros, but still far below the 58 billion euros originally requested by Pistorius. He considers this insufficient given the international security situation and possible threats to Germany.
There is around one billion euros more for security authorities, including the Federal Police and the Federal Criminal Police Office.
What is there for families?
From January, families will receive 5 euros more child benefit per month and child – 255 euros instead of the current 250 euros. By 2026, this will rise to 259 euros per month and child. The basic child allowance, which helps low-income families, will be increased by 5 euros per month and child from January.
What changes for every taxpayer?
The federal government is increasing the tax allowances in the income tax return. The cabinet has already approved an increase in the basic allowance, from which no income tax is due, to 12,084 euros next year from the current 11,784 euros. This also increases the basic child allowance by 60 euros to 6,672 euros next year.
To combat inflation, the income limits for higher tax rates will be adjusted – with the exception of the top tax, which will remain at 45 percent above the highest tax rate bracket.
What the traffic light coalition is doing for the economy
The SPD, Greens and FDP have put together a package for more economic growth. According to the Ministry of Finance, additional growth of more than half a percent – and ultimately around six billion euros more in tax revenue – is to be expected.
Planned measures include improvements in the depreciation options for investments. The coalition wants to reduce bureaucracy and relieve energy-intensive companies of electricity price increases. Employees should be given incentives to work more and longer. There are also tax incentives for foreign skilled workers.
Rent subsidy
The cabinet has already initiated this: from January, there will be an average of 30 euros more in housing benefit. This monthly rent subsidy for low-income citizens is adjusted every two years to reflect inflation and rent and price increases. Due to increases in rent, energy and food prices, the subsidy will increase by an average of 15 percent.
The Commission must approve the changes to the budget made by the federal budget holders in the Bundestag before it becomes legally binding. After the new budget has been submitted to
