Planned cuts by the federal government affect 310,000 couples

AEven if the cuts to parental allowance were to be milder according to the traffic light coalition’s current budget plans, more than 300,000 couples would be affected. According to calculations by the employer-related Institute of the German Economy in Cologne (IW), 310,000 couples with high incomes would ultimately be excluded from parental allowance.

In the coming year, 200,000 couples under the age of 50 will be affected, half of whom do not yet have a child. If the parental allowance cap falls to its final level in 2025, a further 110,000 couples will lose their entitlement, the institute announced on Tuesday, taking inflation and income growth into account.

According to a proposal from the Federal Ministry of Family Affairs by Lisa Paus (Greens), the limit for parental allowance should have been reduced to a taxable annual income of 150,000 euros for couples from 2024. The government factions weakened this plan somewhat during their budget discussions last week. The reference limit is now to fall in two steps: to 200,000 euros for couples whose children are born after March 2024, and then to 175,000 euros from April 2025. The limit for single parents should fall to 150,000 euros before tax.

Basic idea could be lost

The Family Ministry originally put the number of parents affected by the cap at around 60,000. According to the IW’s calculations, however, there would have been 435,000 couples; you also have to take into account those who could potentially have children. In perspective, according to the traffic light plans, 500 million euros should be saved annually in parental allowance. “In the short term, politicians are unlikely to be able to achieve their savings target because of the phased model,” says IW economist Wido Geis-Thöne.