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Finance Minister Lars Klingbeil discussed his plans to boost jobs and productivity at the Bertelsmann Foundation in Berlin on Wednesday. 

The Social Democrat leader is proposing a series of changes that could encounter resistance both from within his own party and from other parts of the coalition government led by Chancellor Friedrich Merz of the conservative Christian Democrats. 

Klingbeil said people should prepare for “difficult and uncomfortable decisions” in the coming years. He said that in recent years the state had “taken hundreds of billions in its hands to cushion the effects of crises,” but that this could not continue. 

“We cannot simply tackle any and all problems with ever more money,” he said. 

Couples’ tax breaks, less early retirement and tax reforms all on the table

Klingbeil said that tax reforms should aim above all to promote working more, not less. 

For instance, he said he wanted to scrap a married couples tax break system known as Ehegattensplitting “in its current form” for future marriages. The statute allows couples where one partner has a high income and the other has a low income or no income to split their income tax burden. This leads to a lower combined tax bill than it would if the high earner was taxed individually and fell into a higher bracket.

Klingbeil said it was necessary to “get rid of a mistaken incentive that primarily has trapped women in part-time work,” portraying the “system from a previous century” as outdated.

Various attempts to reform the law have been floated but failed in recent decades, and the latest bid is by no means certain to succeed. It has already encountered staunch criticism from members of the conservative Bavarian CSU as an attack on married couples.

Klingbeil also said the tax system should be reformed to make work more attractive. He did not detail how, but said the goal would be to relieve the tax burden for 95% of workers, suggesting that higher taxes on top earners and assets or capital gains could plug the gap. 

“For me it’s completely clear that high incomes and large fortunes will contribute in this,” he said. 

The finance minister also said reforms were necessary to remove incentives for early retirement and to reward those who work longer. 

He voiced support for a system that would “orient itself much more strongly towards the number of years worked,” potentially meaning a later retirement for graduates who spent their younger years in higher education.