Income splitting for married couples at risk? Klingbeil’s reform plans and what’s really behind them

It’s a tax model that has stood like a cornerstone for decades – but now it’s looking seriously shaky. Lars Klingbeil, the powerful figure in the SPD, has an idea that’s making many married couples in the country sit up and take notice: he wants to abolish income splitting for married couples. Or at least reform it so it no longer fits the times. I remember discussions from years ago when this topic was treated like a taboo. Back then, the line was: "This is untouchable." Today, when the government has to pinch every penny, things suddenly look different.

Why Klingbeil has income splitting in his sights

The reasoning Klingbeil gives is simple – but it hits the mark. The model, where married couples file jointly and their tax burden is distributed in a way that benefits couples with unequal incomes, comes from a time when women typically stayed home and the man was the sole breadwinner. To be honest, today it’s an anachronism. If you look closely, you quickly see: Income splitting doesn’t support families, it supports a specific set of roles. It hugely benefits couples with a big income gap – and in most cases, that’s still the classic scenario where the woman earns less or doesn’t work at all.

Within the SPD, many have long believed that this model is a real roadblock to equality. And the numbers back them up. I looked at one of the major studies on this a while back, conducted by a respected economic research institute. They clearly show: abolishing income splitting would increase women’s employment rates by an average of up to eight per cent. These aren’t pie-in-the-sky figures; they’re concrete effects. Suddenly, it wouldn’t make financial sense for many couples to have one partner stay home just to grab the tax break.

What this means for the birth rate – the opposite of what you'd think

Now, this is where it gets really surprising. Supporters of the splitting model always say: "This is the backbone of the family, it ensures children." But the reality tells a different story. A study I read in a trade journal back in the day proved the exact opposite. When the state no longer rewards unequal income distribution but instead invests in childcare options and real freedom of choice, the birth rate goes up. It sounds contradictory, but it makes sense: couples are more likely to have children when they know they can both work without being penalized through the tax system.

So the current debate over reforming income splitting is no longer purely about finances. It’s about the question: does the state want to support the traditional breadwinner marriage, or does it want to support modern ways of living? I think many younger couples don’t even hold that traditional view anymore. They ask themselves: why should I be penalized through the tax system just because we both work full-time and send our kids to daycare?

• Fact 1: Income splitting costs the government billions in tax revenue every year.
• Fact 2: It only really benefits couples with large income gaps – often those who don’t actually need the help.
• Fact 3: Countries like Sweden or France have completely different models that boost both birth rates and female employment.

The big coalition of the CDU/CSU and SPD? A stumbling block called the FDP

But it won’t happen that quickly. The SPD knows that too. Because while Klingbeil is gaining more support within his party, it’s a very different story with the CDU/CSU. For the CSU, income splitting is practically sacred. But even if a future government could find a compromise, the FDP is lying in wait. The Liberals have already made this model a top priority. For them, supporting marriage through the tax system is a core part of their economic policy. I doubt such a law would make it through the Bundesrat without a huge fight.

But one thing also needs to be clear: simply abolishing it without any offsetting measures would be a disaster. If you scrap income splitting, you need to bring in other tax relief. Otherwise, the middle of society would be the loser. And that’s exactly what’s being discussed behind the scenes right now. It’s not about abolishing it for the sake of it, but about a reform that ends up being fairer. Perhaps a family-based split that takes children more into account. Or a model that recognizes actual care work, regardless of marital status.

I’m telling you: the debate over income splitting is going to keep us busy in the coming months. Because it’s like a magnifying glass for what’s being discussed in this country right now: how do we want to live, how do we want to work, and what is that actually worth to the government? Stay tuned – it’s going to be a heated season.