Proposed changes to the spouse allowance system and the abolition of contributions-free supplementary insurance are expected to significantly burden couples where only one partner earns income. According to calculations by the German Institute for Economic Research (IW), a household with an annual taxable income of 35,000 euros would have 2,198 euros less disposable income at the end of the year compared to the current system. For a household earning 50,000 euros, the additional deductions would amount to 2,438 euros, and for one earning 100,000 euros, the reduction would be 5,760 euros.
The institute, which is closely linked to employers, anticipates that these changes will have a positive effect on the labor market. Tobias Hentze, head of the State, Taxes, and Social Security department at the IW, stated that this reform package would create an incentive for the non-working spouse to become employed. This is because the spouse could compensate for a lower net income, and furthermore, a greater proportion of the net income would remain available if they were employed. For low and average earners, this incentive would primarily stem from the end of contributions-free supplementary insurance. For higher earners, the decreased tax benefit would be the main driver.
For its calculations, the IW assumed a minimum monthly basic health insurance contribution of 225 euros for a spouse with no income. It also took into account that these contributions reduce the income tax burden because they are tax-deductible. The potential financial consequences of the discussed “real splitting” were calculated based on a transferable amount of 13,805 euros to the non-earning spouse.
Federal Finance Minister Lars Klingbeil (SPD) announced in a speech at the end of March his intention to “abolish the spouse allowance in its current form for future marriages”. This will be replaced by what is called a “fictitious real splitting”. Under this model, partners can distribute a set deductible allowance among themselves in a way that optimally reduces their tax burden. The key figure influencing this system will be the 13,805 euros that divorced or separated spouses can maximize as tax-deductible support payments. Additionally, the Finance Commission Health, established by the federal government, had proposed at the end of March eliminating the free supplementary insurance for spouses, with only a few exceptions.