German workers are poised to experience a muted impact from recent tax cuts, with many facing marginally smaller net salaries in the new year, according to fresh calculations by software firm Datev and reported by “Süddeutsche Zeitung”. The anticipated relief from tax reductions, a key promise of the current government, appears to be largely offset by rising social security contributions, sparking criticism over the effectiveness of the reforms.
Datev’s analysis, based on processing payrolls for approximately 14.7 million employees, reveals that individuals earning up to €5,500 per month across various tax brackets will see only a negligible increase in their net income in 2026. While some modest gains are anticipated, those earning above this threshold are likely to experience larger deductions, reversing some of the intended benefits.
The primary drivers for this outcome are twofold: an increase in mandatory contributions to the statutory health insurance system and a reinstatement of higher social security contribution limits. This effectively recaptures some of the tax relief offered, disproportionately impacting higher earners.
Even those benefiting from the increased basic tax allowance, enhanced child benefits and adjustments to address the “cold progression” effect – which automatically increases the tax burden as income rises – are experiencing minimal gains. Single individuals earning €5,500 are projected to receive only €64 more net income, highlighting the limited scope of the improvements.
The situation is particularly concerning for lower-income earners. The additional health insurance contributions can actually result in a decrease in net pay for those in this bracket. Couples earning between €2,000 and €2,500 gross monthly are facing the prospect of a net income deficit due to the health insurance surcharge eclipsing any tax relief.
A significant reduction is evident for higher earners. Individuals with incomes exceeding €5,500 and particularly those earning over €8,000 are experiencing notable negative impacts. A single mother with one child and an income of €6,000 is projected to lose €177 annually due to the higher contribution limits. Couples earning €9,000 monthly face the most substantial losses, with calculations showing a decrease of €464 (without children) or €442 (with two children).
The findings from Datev expose a complex reality: while the government touts tax reform, the burden of rising social contributions is eroding these gains. Critics are now questioning the efficacy of the policy, arguing that it primarily benefits higher earners while failing to provide meaningful relief for those most in need and potentially burdening lower-income families. This situation is likely to fuel further debate regarding the fairness and overall impact of Germany’s fiscal policies.