According to a report in “Bild” on Wednesday, Federal Finance Minister Lars Klingbeil (SPD) wants to abolish spouse splitting. As part of the planned tax reform, the Finance Minister is pushing for the current splitting model to be abandoned in the future. “Bild” refers to government circles.

Accordingly, Klingbeil wants to encourage spouses to take up work or work more. This should help to increase the overall volume of work in Germany and promote an economic upswing. The SPD campaigned for a reform of spousal splitting in the federal election campaign, but large parts of the Union reject a reform.

A heated debate has been developing around spousal splitting for a long time. The World even wrote from the “largest tax increase in history” and additional costs of 20,000 euros annually.

Behind the turmoil there are many exaggerated hopes and fears. Families should still be aware of the debate. Because a lot could actually change for them soon.

20,000 euros more taxes?

The debate about spousal splitting has been simmering for decades. Introduced in 1958, the rule allows married and civil partnership couples to split their income equally.

Because income tax increases with higher income, the couple saves money – up to 20,000 euros in taxes per year, the media write, citing a study by the German Institute for Economic Research (DIW).

Calculation examples like these fuel fear of an end to spousal splitting. With them the world justifies the statement of the “biggest tax increase of all time”.

Individual cases and overlooked alternatives

Unclassified examples like the one above distort the debate for two reasons:

1. The examples count Extreme cases that hardly affect families. According to a study According to the German Economic Institute (IW), only around one in 25 households earns as much as the family in the example above. For the stated extreme value of 20,000 euros in savings must be a household earn over half a million euros a yearhas been calculated by the German Institute for Economic Research (DIW).
2. The examples overlook the question of what comes after the spouse splitting. Even experts who support an end to the model almost always do so Alternatives as a replacement. This reduce the loss per family, compensate for it or even make the family better off.

It seems unlikely that spousal splitting will be completely abolished. For most households, the consequences were less severe than in the extreme cases that some media and influencers use to stir up fear.

More realistic examples show what could really happen to households.

That’s really how much money is at stake

A more realistic example reveals the actual advantages of spousal splitting:

• According to the IW study mentioned, a family of four in Germany counts with a household income of around 70,000 euros gross to the middle class.
• Earns a partner 50,000 euros and one 20,000 eurosspousal splitting saves the family around 2700 euros yearly.
• Earns a partner 40,000 euros and one 30,000 eurosspousal splitting saves the family around 300 euros yearly.
• In an example the United Payroll Tax Assistance saves a couple with 45,000 euros and 15,000 euros income through the spouse splitting 850 euros Steer.

The supposedly five-figure savings of spousal splitting disappear significantly under more realistic assumptions.

Even 300 euros remains a lot of money. But it is very likely that families would not even have to forego this amount after the spousal splitting ends.

Alternatives: allowances and limits

In the medium term, a reform of spousal splitting does not seem unlikely. Some politicians keep saying that it is out of time. It encourages women to spend less time raising children and caring for them, which threatens part-time traps and poverty in old age.

Studies showthat an end to splitting could actually bring women into the labor market and allow their working hours to be extended. It could also bring the federal government around 20 billion euros in additional revenue.

The Union has so far stuck to splitting. She fears that after a change women would have to work more and have less time for the family. This could further reduce the birth rate.

These contrasts make a compromise likely. The federal government could also achieve many of the advantages mentioned with smaller reforms than abolishing spousal splitting.

• Cover splitting: Loud DIW The federal government already receives several billion euros in additional revenue when it limits splitting for particularly high incomes. For normal earners, everything would remain the same. However, very high earners could only share a portion of their income with their partner.
• Transferable basic allowance: There is no splitting, but one partner can transfer their basic allowance (currently 12,096 euros) to the other. The effect is similar to increased capping: most normal earners no longer pay. High earners face a significant additional burden.
• Additional tax benefits for married couples: There is no splitting, but married couples receive an additional tax allowance or a deduction from the tax payable. For whom it is worthwhile depends on the difference in earnings: the smaller this is, the more likely an additional allowance will be to bring in even more net income.

For most average earners, these reforms mean everything remains largely the same. The state often takes in more, but continues to support families.

An end to spousal splitting may even relieve the burden on families.

More money through family splitting?

Families would have more money after spousal splitting ends if it gives way to family splitting. The Thuringian CDU made this proposal a few months ago.

• Family splitting takes into account the number of all household membersincluding children.
• So it divides the household income not only by two, but also by higher values, depending on the size of the family.
• Children can be included in the calculation with a factor, around 0.5.
• A family of four with an income of 120,000 euros would then be taxed in three parts of 40,000 euros each, instead of in two parts of 60,000 euros each, as with spouse splitting.
• Through this the family saves a lot of taxes. How much depends on the design of the rule.

From the point of view of its supporters, the argument in favor of family splitting is that it rewards families more for having children and thus counteracts the aging population. It also puts unmarried couples on an equal footing with married couples and reduces the incentive for women to step back.

The argument against family splitting is that it costs the state revenue in times of tight budgets. In the long term, a higher birth rate could compensate for this. But it is uncertain whether this will actually happen or whether families will just take the money with them.

Reform not unlikely

No matter how the debate develops: a reform of spousal splitting could bring the state additional revenue, but only burden a small, already wealthy part of the population. An idea that can definitely be accepted by the majority.

Families benefit from knowing the options and adapting to them sensibly. The motto should almost always apply: It’s worth staying calm, even if Federal Finance Minister Klingbeil brings the issue back into focus.