The social wing of the CDU is demanding substantial improvements to the planned tax reform. According to Dennis Radtke, the head of the Christian Democratic Workers’ Association (CDA), the Federal government must, in addition to the scheduled tax relief, address the issue of “cold progression,” which refers to tax hikes that happen gradually due to inflation. Speaking to “Stern,” Radtke stated that any omission would be a deception toward taxpayers.
While the reform agreed upon by the Union and the SPD marks a necessary first step, Radtke cautioned that it should not be presented later as compensation for inflation. This is particularly crucial during periods of high inflation. Radtke clarified that simply obtaining higher wages because consumer prices are rising does not automatically make employees wealthier, arguing that the state should not unilaterally benefit from such inflation-driven pay increases. For this reason, he is advocating for an annual automatic mechanism to compensate for cold progression, modeled after the Austrian system.
Radtke emphasized that inflation compensation should not be considered a political favor, but a necessary standard procedure. He added that this mechanism would clarify the planned income tax system, distinguishing between genuine real relief and amounts the state is already obligated to cover. Note that the Association of Taxpayers estimates that the state will generate eight billion euros in additional revenue next year.
Currently, the tax reform agreed upon by the Union and SPD in the coalition committee provides citizens with relief of 3 billion euros next year, increasing to 7 billion euros the following year. Radtke suggests that adding his demanded automatic compensation would roughly double the total scope of the tax reform.
In the past, governments have compensated for cold progression. Most recently, in 2024, the Federal Minister of Finance Christian Lindner (FDP) oversaw compensation amounting to approximately 10 billion euros.
