Posted by: Dirk | March 29, 2008

Income taxes in Germany – who pays how much?

The discussion on redistribution is very active in Germany. However, politicians focus on minimum wages. Personally, I believe that minimum wages can change the income distribution only when a significant amount of jobs is covered. This means that the economy is distorted at a very high level, which probably affects efficiency (a lot). That is why income inequality is mainly reduced through the progressive tax system.

Germany reduced its income tax rates through the tax reform of 2000. The highest marginal tax rate was reduced from 52 to 42 percent. This has led to an increase in inequality, since the biggest reductions came at the top. Still, the tax code is progressive. This can be seen clearly in the Monatsbericht 03.2002 of the Federal Ministry of Finance (data from 1995, estimations until 2001), which depicts the shares of tax payers (sorted by taxes paid) in total income taxes:

incometax.jpg

A recent study (in German) basically confirms the results (pdf) .

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Responses

  1. […] of government check, while 50% (of 370+ million) almost nothing (or nothing), while at least in germany (looking at the data) that % is <30% (of 82 +/- million), effectively, everybody has to pay […]


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