By Michelle Martin and Madeline Chambers
BERLIN (Reuters) - Germany has scope to cut taxes by around 15 billion euros after the federal election in September 2017 despite increased spending on migrants, Finance Minister Wolfgang Schaeuble said on Tuesday
Campaigning is getting underway for next year's vote and Chancellor Angela Merkel's Christian Democrats (CDU), of which Schaeuble is a member, have their work cut out trying to please voters after their open-door refugee policy has alienated some.
The anti-immigrant Alternative for Germany (AfD) beat the CDU in a regional election in Merkel's home region on Sunday, a crushing defeat that she has conceded was due to her party's pro-refugee stance.
Speaking to the Bundestag lower house of parliament, Schaeuble stressed that employment, wages and taxes were increasing in Germany while tax revenues were rising, the economy was growing and the budget was balanced.
The Munich-based Ifo economic institute said earlier that Germany's current account surplus will probably hit a new record of 278 billion euros ($310 billion) this year, overtaking that of China again to become the world's largest.
Schaeuble said that while Germany would need to put funds toward integrating the hundreds of thousands of migrants who arrived here last year and on domestic security - at a time when a series of attacks on civilians have left Germans on edge - there would be room for manoeuvre on taxes.
"After 2017, in the next legislative period, we'll have room to cut taxes by around 15 billion euros," he said. He added that these tax cuts should be aimed at people on low to medium incomes.
Merkel has said that Germans would get tax relief in the next legislative period.
Some Germans, particularly in poorer eastern regions, are angry that the government is spending vast sums on migrants, with data on Monday showing that state spending on benefits for migrants climbed by around 120 percent in 2015 to almost 5.3 billion euros.
Schaeuble also said he would seek to correct "cold progression" or bracket creep in the tax system, from Jan 1, 2017. Thresholds in Germany's progressive tax system are not automatically adjusted for inflation so if someone gets a pay rise, they can find they end up with a net pay cut.
Schaeuble said he would aim to reduce the burden caused by "cold progression" by around two billion euros.
($1 = 0.8957 euros)