The tax breaks form the centerpiece of a coalition deal agreed between Chancellor Angela Merkel's conservative Union bloc - the Christian Democrats (CDU) and the Christian Social Union (CSU) - and their new federal partners, the pro-business Free Democrats, following national elections last month.

The policy blueprint will see income taxes slashed by around 24 billion euros ($36 billion), with a focus on reducing the tax burden on families with children and reforms to corporate and inheritance taxes.

But Stanislav Tillich, the CDU premier of the eastern German state of Saxony, has taken a swipe at the plan, insisting the drop in revenue would cancel out his state's budgetary surplus and negate recent measures taken to balance Saxony's books.

"It cannot be that this money is now simply used to cover for a reduction in taxes," he told the German newsmagazine Der Spiegel. "These tax cuts are irresponsible."

Tillich added that plans for how the government would compensate for the drop in revenue remained "very cloudy."

Peter Mueller, who heads the CDU government of the small southwestern state of Saarland, said he agreed with the federal government's goal of putting more money into the hands of German tax payers, but said plans for achieving this through sweeping tax cuts were unfounded.

"I believe we should stick with the proven linear-progressive tax plan," he said.

Court case?

The state premiers said the tax cuts could lead to revenue shortfalls amounting to billions of euros, and threaten upgrades to kindergartens, schools and universities.

Saxony-Anhalt Premier Wolfgang Boehmer had previously threatened to bring a case before the country's constitutional court if the federal government pushed ahead with its tax plans.

The new secretary-general of the CDU, Hermann Groehe, called on Tillich and Mueller to stand by their federal partners, highlighting that several state premiers who were involved in the coalition negotiations had given their full support to the tax cut plans.

"The party's various bodies have unanimously approved the coalition deal," he told German daily Hamburger Abendblatt.

dfm/Reuters/AP

Editor: Kyle James