Tax dispute in the coalition agreement: Who will pay for the future?

On April 11, 2025, the positions of the Union and the SPD with regard to taxes and finances were analyzed in detail. While the SPD speaks of an “additional burden on top earners,” CSU leader Markus Söder rules out tax increases. The coalition agreement promises relief, but without tax increases. Many ideas from the working group are not implemented, and the solidarity surcharge remains in place, although the Union wants it to be abolished. The SPD also wanted to reform the inheritance tax, but this is not anchored in the coalition agreement.

The coalition agreement contains promises to reduce the income tax burden for employees, although the exact details remain unclear. The treaty bears a strong signature of the Union and focuses on corporate tax reform. CDU leader Friedrich Merz has promised an “investment booster” for companies. Economist Monika Schnitzer from the Council of Economic Experts said that large companies will benefit from turbo depreciation. There are concerns about the potential use of the €500 billion special fund, which could be used for election campaign gifts. The CSU has integrated expensive projects, such as mothers' pensions and agricultural diesel subsidies, into the contract.

Important points of the coalition agreement

The question remains whether the coalition is able to finance its projects without raising taxes. SPD chairman Lars Klingbeil emphasized that all points in the coalition agreement must be financed. The contract contains a total of 299 “want” and 803 “will”, but often in the form of tests. The pension level is to be secured at 48 percent until 2031, which requires additional money. The CSU is also planning to expand the mother's pension, which will cost around five billion euros per year. This is financed through tax revenue, with an increase from 100 euros to 120 euros per child.

Another project in the coalition agreement is the introduction of the “early start pension”, in which ten euros per child are to be put into a retirement savings account every month. This project could cost over 80 million euros per year and is scheduled to come into force in 2026. Merz emphasized that responsible use of tax money and a solid federal budget are essential. All projects are subject to financing.

In addition, as part of the coalition agreement, it was stipulated that rejections of asylum seekers at the EU's external borders should be possible in coordination with European partners, without affecting the right to asylum. The regular naturalization period remains five years, and refugees with limited protection status are not allowed to bring family members over for two years. The controversial “Heating Act” is to be withdrawn and replaced by a new Building Energy Act, which should be designed to be more flexible.

Furthermore, reductions in benefits for citizens' benefit are planned; if reasonable work is repeatedly rejected, a “complete withdrawal of benefits” can occur. In the future, citizen's benefit will be referred to as “basic security for job seekers”. A minimum wage of 15 euros per hour is planned from next year, which represents another important step in the coalition agreement.