Germany’s payroll tax system has a quirk that foreigners often find baffling: married employees can choose a “tax class” that decides how much is withheld from each partner’s pay. Finance Minister Lars Klingbeil wants to remove the most popular option, according to a ministry paper first reported by the business daily Handelsblatt and also seen by Der Spiegel.
Today, a couple can either both sit in class IV or split into classes III and V. The higher earner in class III keeps more each month, while the partner in class V, usually the one earning less, sees steep deductions. Klingbeil’s ministry wants to fold III and V into an automated “factor procedure”, which spreads withholding according to each spouse’s share of household income.
Officials stress that the change would not raise or cut anyone’s annual bill; income tax is settled jointly at the end of the year either way. The ministry argues it would make the system fairer and simpler, and that many couples would no longer have to file a return. It frames the move as a matter of fairness for women, who more often work part-time and lose a large slice of their pay under class V. SPD deputy parliamentary leader Sonja Eichwede says it would make extra work pay and lift pension entitlements.
The taxpayers’ association has flagged possible side-effects: benefits tied to monthly net pay, such as parental allowance, could shrink, and some families might have less cash during the year.
The bigger obstacle is political. The plan is not in the coalition agreement, and the conservatives who govern with Klingbeil’s Social Democrats are sceptical. Bavaria’s finance minister Albert Füracker of the CSU rejected it as “ideology-driven paternalism” towards married couples. A similar reform was approved by the previous government’s cabinet but never became law. Klingbeil now wants it in an autumn tax-simplification package being negotiated with the federal states.
