The federal cabinet has given the go-ahead for the introduction of citizen income in Germany. It is to replace the current Hartz IV system on January 1st. Inflation is also to be compensated for by the new resolution.

The standard rates of basic security should increase significantly. Single people should receive 502 euros a month and young people 420 euros. Today, single people receive 449 euros. In addition, job seekers in the job centers should be exposed to less pressure in the future. The principle according to which placement in a job has priority is to be abolished. Instead, further training should be strengthened.

In any case, the costs for the apartment should be covered in full for the first two years. Savings of up to 60,000 euros should also be allowed to be kept during this time. In addition, no sanctions should be imposed in the first six months if, for example, a job offer is rejected.

The cabinet decision clears the way for parliamentary deliberations on social reform.

The effects of high inflation on income tax are also to be cushioned by a tax reform in the coming year. On Wednesday, the cabinet approved plans by Finance Minister Christian Lindner (FDP) to compensate for the so-called cold progression. Among other things, the basic allowance is to be raised, i.e. the income up to which no tax is paid.

The federal government wants to raise this limit from the current EUR 10,347 to EUR 10,632 in the coming year and EUR 10,932 in 2024. Other key values ​​of the tax rate will also be shifted in order to compensate for the effect of the cold progression. This is a kind of creeping tax increase when you continue to pay high taxes even though purchasing power is falling due to inflation. This increases the relative tax burden.

In the future, the top tax rate will also only apply to higher taxable income. Specifically, at 61,971 euros in the coming year and at 63,514 euros in 2024. However, the federal government does not want to touch the limit for the even higher tax rate for the wealthy. Recently there has been criticism that top earners benefit more from the plans in absolute terms than low earners.

With the same law, the federal government also wants to raise child benefit and the child tax allowance. In the coming year, the child benefit for the first three children will be a uniform amount of 237 euros per month.

With the law, home office flat rates of up to 1,000 euros can be set instead of 600 in the future – regardless of whether you work in your home office or from the sofa. In addition, the lump sum is no longer to be limited in time, but is to apply permanently and relieve citizens of 1.4 billion euros a year.

With the home office flat rate, you get tax compensation for the extra costs of working at home, even if you can’t deduct your own office. You can set five euros per day in the home office – so far a maximum of 120 days, in the future for up to 200 days.