Nova workboard

a blog from young economists at Nova SBE

The inequity of the tax system

Since the general election debate in Germany this topic is very often discussed: Does it need a tax increase and whom should it hit – and is the German tax system fair at all? Numbers of the Organization for Economic Cooperation and Development in Europe (OECD) show how strong families compared to singles are taxed. The result of this international comparison reliefs that Germany cuts in midfield, this means that the state affect it only moderately. Leader is France, where the state and social retained share a particularly high proportion of income.

For example, the OECD assumes an annual average earnings of a worker of 44,81 euros. If an employee who is unmarried and has no children would earn that much, his duties and tax rate would be 49.8 percent. In a family with two children and the same average income the tax rate would be just 34.2 percent. This comparison shows that in Germany poorer families with children are relatively more relieved from high taxes than those without children.

However, the OECD figures also show that despite the income taxes money is hardly redistributed in Germany. Basically, most control systems operate on the principle of performance: who earns more should pay more taxes. The increased burden of rising income is a primary instrument for redistribution in a welfare state. But the numbers show that this synthesis doesn’t apply for Germany.

Whether someone is a single parent, single or a has a family and she earns just below average the tax burden is always higher than the OECD average. This is mainly due to the design limitations of social security contributions, which no longer rise above at a certain point. The state charge low earners much more compared to top earners. Added to this is the so-called “bracket creep” accrue. It means that all low and average earners slip automatically in a higher tax level if their salary increase. This happens even if they have de facto nothing more in real terms because of the inflation.  


Stefan Goettgens


Author: studentnovasbe

Master student in Nova Sbe

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