According to CDU politician Thorsten Frei, the planned tax reform cannot completely compensate for inflation. Instead, he promises to “tighten his belt.” In addition, the planned cuts in social services and health will particularly affect many households.

The debate in the Bundestag about the coming austerity measures is gradually coming to a head. Thorsten Frei, leader of the CDU/CSU faction in the German Bundestag, answered inBILD interviewthe question “will citizens have to tighten their belts in 2027?” with a clear yes.

A tax reform and a compensation for the so-called “cold progression” were actually planned for next year. With “cold progression”, tax payers move into a higher tax bracket due to inflation-related wage increases and, in real terms, have less money in their pockets at the end of the year.

In order to compensate for this, the tax classes and their thresholds should have been adjusted. It was precisely this plan that Frei now questioned. “With what we have planned in terms of income tax reform, we have already partially compensated for the cold progression.” But he couldn't promise full compensation.

The income tax reform envisages increasing the basic tax allowance from 12,348 euros to 12,564 euros. In addition, child benefit is to be increased from 259 to 267 euros per month in order to provide relief. The changes are scheduled to come into force on January 1, 2027.

Exacerbating budget situation: cuts in social services and record sums for defense

The announced lack of full tax relief comes against a budget that has planned far-reaching social cuts for next year. Expenditure on labor and social affairs will decrease in percentage terms and in the area of ​​health the budget is to be cut by over a third from 21.77 billion euros to 14.33 billion euros. Funds should also be cut from basic security for the unemployed and in the family area.

There are also new taxes for consumersplanned. Starting next year, the tobacco tax is to be increased and a plastic tax of 550 euros per ton of plastic in packaging is to be introduced. From 2028, a new sugar tax will also be introduced. These taxes will lead to rising prices of many products.

Overall, the coming budget envisages a high level of new debt as well as increased spending overall. But while social cuts are being made, the Ministry of Defense in particular benefits from this. Of the total of 555.4 billion euros in the budget, 109 billion euros are planned for defense - i.e. military, war-related infrastructure and others. This means that expenditure will increase by almost 27 billion euros. In the following years, expenses are expected to increase by almost half again.

Budget draft for 2027: record spending for the Bundeswehr, cuts in the social sector

Associations close to capital are also calling for savings from the state

Party leader Frei bases his warning statements on the fact that the economy continues to weaken. Real economic growth of 1.3 percent is expected for 2026. For 2027 it will only be 1.1 percent and for 2028 only 0.6 percentpredicted.

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However, there are also voices that criticize the government's current course. Thorsten Alsleben, Managing Director of the employer-oriented New Social Market Economy Initiative (INSM),beatsfor example, that the state and not just the citizens should save. Instead of creating over a thousand new jobs to control the newly planned taxes, the state should streamline the administration.

A similar suggestion came from Taxpayer President Reiner Holznagel: "Anyone who demands sacrifices from citizens must set a good example themselves. Each coalition partner should forego at least one ministry by sensibly merging houses. In addition, the entire state's own consumption, personnel expenditure and administrative structures must be consistently checked."

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