Germany's finance minister wants to scrap spousal tax splitting

Highly controversial, but not well understood: German Finance Minister Lars Klingbeil wants to change the tax benefits for married couples.

Last weekend, several thousand people took to the streets in Munich to demonstrate against abortion and assisted suicide.

One speaker made an extremely dramatic plea against what he called the "culture of death" that has allegedly taken hold in Germany.

One sign of this, the speaker argued, was that the government is planning to abolish a regulation known as "spousal tax splitting."
Is tax law really relevant to deep philosophical debates on the sanctity of life?

Is it even a matter of life and death at all?

Surely we needn't go that far?

In any case, the intense political uproar surrounding the new debate on whether to abolish spousal tax splitting is notable, even by today's standards of populist outrage.

An advantage for couples with widely divergent incomes
The row was sparked by Germany's vice chancellor and finance minister, Lars Klingbeil , of the center-left Social Democratic Party (SPD) , who said he wanted to abolish and replace the joint taxation of spouses' income, a system that has been in place since 1958.

How exactly does spousal tax splitting work?

In Germany, married couples (and since 2013, couples in civil partnerships), can choose to have their income assessed jointly by the tax authorities.

It means that the taxable income for both spouses together is halved – as if both partners had each earned an equal half of the income.

Their tax liability is then determined by simply doubling the income tax due on one half.

As people who earn more pay higher taxes in Germany, this system benefits couples where one partner (and often this is still the man) earns significantly more than the other (in practice often the woman).

Costs of up to €25 billion per year
Some critics have long viewed splitting as a tool to keep women out of the labor market, because the more a woman earns, the larger her tax burden becomes.

Klingbeil seems to agree, arguing on ARD television in late March that the system was "out of step with the times." The spousal splitting system reflects "a view of women and families that is completely at odds with my own," he said.

Chancellor Merz said to be in favor of splitting
On Monday of this week, Klingbeil got some surprising support on this from Johannes Winkel, head of the youth wing of the conservative Christian Democratic Union (CDU) .

"Given the demographic reality, the government should create incentives to ensure that both partners in a relationship are employed," Winkel told the Funke Media Group.

"In the future, tax relief should primarily be granted to married couples when they are facing hardships related to raising children."
But Germany's chancellor is a vocal skeptic of the proposal.

Berlin under pressure to fix pensions, health care and taxes
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At around 74%, the labor force participation rate for women in Germany is one of the highest in Europe, but half of them work part-time.

Klingbeil's idea is to replace the existing system with a more flexible approach: Both partners would be able to distribute tax-free income among themselves in such a way that it minimizes their tax liability.

This would allow the couple to continue enjoying a tax advantage, albeit not to the same extent as before.

And whether one partner earns more than the other would become less important.

However, it remains to be seen whether Klingbeil will be able to push through his proposal.

Aside from Germany, similar regulations offering tax benefits to couples exist in Poland, Luxembourg, Portugal and France.

This article was originally written in German.