Germany's €1,000 tax-free worker bonus blocked by Bundesrat vote
A planned tax-free relief bonus for German workers has been blocked by the Bundesrat, the federal council representing the states. Berlin’s governing mayor, Kai Wegner, has now called for alternative measures to support citizens facing rising costs. The decision leaves employers unable to offer staff a €1,000 tax-exempt payment intended to ease financial pressure. The Bundesrat unexpectedly rejected a bill that would have allowed companies to pay employees a tax-free bonus of up to €1,000 by June 2027. The proposal aimed to help households struggling with soaring energy prices, partly driven by tensions in the Iran conflict. However, states raised concerns over the financial burden, as nearly two-thirds of the lost tax revenue would fall on regional governments and municipalities.
Berlin abstained from the vote, reflecting divisions over the plan’s feasibility. Wegner has since urged a shift in focus, proposing the suspension of the CO₂ tax as a more effective way to reduce living costs. Meanwhile, trade unions in Berlin and Brandenburg report that the bonus had barely featured in recent wage talks, suggesting limited immediate impact on workers. With the bill stalled, the federal government can now convene a mediation committee to negotiate a compromise between the Bundestag and Bundesrat. The states’ objections centre on funding distribution, arguing that the financial strain would disproportionately affect local budgets.
The rejection of the relief bonus leaves workers without the planned tax-free payment for now. Wegner’s push to suspend the CO₂ tax signals a search for alternative solutions. Any further steps will depend on negotiations in the mediation committee, where funding and cost-sharing remain key sticking points.
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