Chancellor Olaf Scholz's center-left Social Democratic Party (SPD) has made a new proposal to scrap a 1950s-era tax law which allows generous tax benefits for married couples. Critics have long argued that this practice unfairly benefits traditional heteronormative gender roles — and that the state subsidy for marriage would be better spent elsewhere.

"Marital splitting" ("Ehegattensplitting") allows for a couple's joint income to be halved, and the income tax due is then doubled — meaning the greater the disparity in earnings, the greater the tax benefits. Since men earn an average of 18% more than women in Germany, many argue that marital splitting benefits men and gives married women a financial incentive to stay at home. It is also, some have said, effectively a €28-billion ($31-billion) state subsidy for married couples.

Germany is sitting on a mountain of debt and the federal coffers are strained. Earlier this month, the government caused controversy when it announced it would scrap the parental allowance ("Elterngeld") for households with an annual taxable income of over €150,000 from 2024.

Now SPD leader Lars Klingbeil has said he wants to cancel what he describes as the "antiquated tax law that favors the traditional division of roles between men and women" instead of cutting the parental allowance.

Tax benefits from marital splitting can amount to up to €18,000 a year for married couples, according to the German Institute for Economic Research. Single parents and unmarried couples don't benefit at all.

Critics have said getting rid of the tax break for all married couples would save the government purse up to €20 billion a year, according to the Federal Agency for Civic Education — money that could be used to increase child benefit allowances. Tackling child poverty is one of the Scholz government's other major projects.

Debate over the German constitution

Marital splitting was introduced in 1958 after the Federal Constitutional Court ruled that tax law previously disadvantaged married couples. Under Article 6 of the German Constitution, "marriage and family are under special protection of the state order."

The proposal to scrap marital splitting from German tax law was first floated in 1981 and has been hotly debated ever since. Critics of the proposal have argued that Germany's constitution simply doesn't allow it. Not true, said Joachim Weiland, a law professor at the German University of Administrative Sciences Speyer.

"The Federal Constitutional Court has so far only said marital splitting is permissible but not mandatory," Wieland told DW. "The marriage and family should, according to the Basic Law, be promoted, but that does not necessarily mean through the introduction of marital splitting. So far, that has been a sovereign political decision of the legislature."

Wieland argued that the current tax benefit for married couples is outdated and misguided, because many couples decide not to have children.

"Subsidies should be allocated to children because they cost money," said Wieland. "If a married couple doesn't have children, why should they be treated better than an unmarried couple with children?"

Tax break reinforces traditional gender roles

Critics have said marital splitting reinforces traditional heteronormative gender roles by making going to work financially unattractive in marriages where one partner earns significantly more than the other — the more equal the salaries, the less a couple benefits.

"Women are disproportionately affected because they are disproportionally the classic 'second earners,'" said Katharina Wrohlich, professor of public finance, gender and family rconomics at the University of Potsdam and head of Gender Economics Research Group at the German Institute for Economic Research.

"The rates of part-time work are extremely high and the gender pay gap is also very wide in Germany compared internationally," Wrohlich told DW. "Women earn less per hour and also work fewer hours, which means they have lower incomes on average and are therefore impacted by the negative repercussions [of splitting] more frequently than men."

The employment rate in Germany was just over 73% for women and 80% for men in 2022, according to the Federal Statistical Office. But more than half of women work part time. Under the splitting system, women are effectively subsidized to remain low earners — and so encouraged to maintain a financial dependence on their partner.

The system also has the potential to impact the allocation of paid and unpaid work within the family. Women are also more at risk of sliding into poverty in the case of divorce — particularly female pensioners who have made lower pensions contributions.

But critics have said marital splitting doesn't just reinforce gender equality, but also social inequality in general because it leads to couples with very high incomes having a much lower tax burden than if they had been taxed individually.

"In Germany, compared internationally, the rates of part-time work are extremely high and the gender pay gap is also very wide. Women earn less per hour and also work fewer hours, which means they have lower incomes on average and are therefore impacted by the negative repercussions [of splitting] more frequently than men," Wrohlich told DW.

Scrapping the marital tax law would also encourage more women into work — and thus pump more taxable income into the German economy. Businesses have said it could also help to ease the country's shortage of skilled labor.

Proposal unlikely to be implemented

Although the proposal was included in the SPD and Green Party manifestoes, it's unlikely to be implemented any time soon. The neoliberal Free Democrats (FDP), part of the governing coalition, have already come out against the idea. The FDP family policy spokesperson dismissed the proposal as "a sham" designed to introduce tax increases through the back door.

The proposal was not included in the coalition agreement, and even if it were to be put forward by lawmakers it would still require approval from the Bundesrat, the federal parliament that represents Germany's states. There, the conservative CDU and CSU remain vehemently opposed to the reform.

Germany offers some of the most generous financial benefits to married couples in Europe. A report by the European Commission in 2021 found that married couples were financially better off in Luxembourg, Germany, Ireland, Poland, Spain, Czechia and Belgium. In comparison, married couples in Cyprus, Malta, Italy and Greece are worse off due to a reduction in means-tested benefits and pensions.

The unequal treatment of couples depending on their marital status violates the principles of equality — particularly around gender, according to the report. It concluded that marriage itself does not require any specific fiscal benefits from the state, since being married does not create any additional financial needs.

Edited by: Ben Knight

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