The Free Democratic Party (FDP) has unveiled an ambitious tax reform plan aimed at simplifying income tax brackets and ensuring workers retain at least half of every additional euro earned after deductions.

The FDP has introduced a comprehensive tax proposal that seeks to overhaul Germany’s income tax system, reducing it to four brackets with rates of 15%, 25%, 35%, and 42%. A key feature of the plan is the ’50-Cent Rule,’ which guarantees that individuals keep at least 50 cents from every additional euro earned after taxes, social contributions, and the loss of state benefits. The party also aims to abolish the solidarity surcharge, eliminate cold progression, and scrap the national CO₂ tax.

Additional measures in the FDP’s plan include raising the annual savings allowance from €1,000 to €10,000, freezing social contribution increases, and maintaining the current cap on contribution assessments. The party proposes reducing corporate tax rates to 20% by 2027, preserving mini-jobs, and abolishing inheritance tax. These reforms, estimated to provide €31 billion in relief, are positioned as a response to what the FDP describes as unmet promises of tax improvements for middle- and lower-income earners.

Despite the bold proposals, the FDP has not outlined specific funding mechanisms for its reforms, instead suggesting cuts to subsidies, development aid, and government programs, alongside anticipated economic growth from lower taxes. Meanwhile, criticism of the tax plans has emerged from the CDU, with members labeling the proposals as lacking ambition and questioning their feasibility. The debate underscores growing tensions over fiscal policy within Germany’s political landscape.