Finance

Do you pay a lot or a little?

Those who earn more also pay more taxes. But do you know what your share of the state’s revenue is? And how do you compare to others? Our graphic shows you.

Top earners should pay more, the middle class less – how much income tax is fair for whom is always the subject of political debates. But how much are the different groups actually taxed?

Researchers at the German Economic Institute (IW), which is close to the employer, calculated this in a study commissioned by the lobby organization “Initiative Neue Soziale Marktwirtschaft”.

The database is based on wage and income tax statistics and the so-called “Socio-Economic Panel”, a regular survey among private households in Germany. According to this, for example, the top tenth of income earners paid around half of their income tax receipts in 2019, and the bottom half around 7 percent.

Interactive graph compares your tax burden

You can test for yourself whether your own tax burden is relatively large, average or rather small – with the help of an interactive IW graphic.

You can see this in the graphic:

  • The graphic shows how much income tax the various income groups in Germany pay on average.
  • You can put yourself in line with your household and see how much you and the poorer and richer households contribute to total income tax revenues.
  • Because of the progressive rate of income tax, the percentage burden from low to high incomes increases steadily and relatively evenly.

How to use the graphic:

  • Enter your annual gross household income in euros and the number of people living in the household as well as under 14 years of age. Then click on “Calculate position” to display your tax burden.
  • Instead of displaying the tax burden in percent, you can also display it in absolute euros. To do this, select the item “Income tax in euros per year” above the graphic.
  • The graphic also allows a glimpse into the past. To do this, select the year that interests you on the timeline. The choices are 1998, 2004, 2007, 2010, 2014 and 2019.

Tax revenue has risen 84 percent since 1998

In the past 20 years, the burden in all income groups has risen significantly in terms of percentages and even more so in absolute terms in euros. The total income tax revenue in 1998 was around 188 billion euros, in 2019 it was 346 billion euros.

The jump from 1998 to 2004 is an exception, because the Schröder government reformed the tax rates during this time. At that time, the top tax rate was lowered from 53 percent to 42 percent and the wealthy tax rate of 45 percent was introduced. Low incomes have benefited more than high incomes: The proportion of the lower half of the income distribution fell from 7 to 5 percent.

Cold progression made the tax burden grow again

In the years that followed, the burden has risen continuously. This is due to the cold progression. One speaks of this when your income only increases to the point that it compensates for inflation and you can therefore not buy more than before, but still have to pay higher taxes because your income has increased.

Because of this phenomenon, the average household in 2004 paid an average of 5.4 percent of tax revenue per adult, but in 2019 it was already 8.5 percent. The lower incomes were hit harder by the gradual tax increase than the upper ones: the share of the lower half of the tax revenue was most recently back at the original value of 7 percent.

This could be the impact of the corona crisis

In their study, the IW researchers are also simulating the year 2021. Accordingly, the total gross income could collapse by around 3.4 percent due to the corona crisis. Wage replacement benefits such as short-time work allowance dampen the decline.

Average gross incomes are likely to decline the most. This could increase the share of the upper tenth of income – and thus also of income tax. The researchers assume an increase from 50.9 to 52.7 percent. Across all income groups, however, the calculations show that the tax burden will fall from 14.3 percent in 2019 to 12.8 percent in 2021.

Do you want to make more comparisons? Test here whether your apartment is relatively large or small. Also how lucrative your job is, you can be shown with an interactive graphic of the IW.

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