A new study shows that even average German earners give up half of their income to the state. There are calls for tax reform from socialists and taxpayers' organizations, but the German government won't budge - yet.
Some 4.2 million German workers, or one in eleven, have to pay the country's top 42-percent rate of income tax, according to a new study by the Cologne Institute for Economic Research (IW) - a figure that gave taxpayers' groups another chance to complain about the burdens imposed by the German state.
The study, still unpublished but leaked to "Handelsblatt" newspaper this week, also shows that even low and average earners in Germany end up giving up much of their income - when health and social security contributions are factored in.
A single person with a monthly income of 1,940 euro ($2,000) has to pay 46 percent of it in taxes and social contributions, while those earning 3,250 euros pay 51 percent. In fact, anyone earning a little over 50,000 euros a year is already in the top tax bracket. Married couples do marginally better because of a tax law that allows income to be equalized between partners.
The German Taxpayers Federation (BdSt) was quick to pounce on the new figures to promote their own tax reforms, which predictably call for reductions in Germany's tax burdens. According to figures released last week by the Organization for Economic Co-operation and Development (OECD), Germans pay the second highest amount of tax and welfare and health contributions in the industrialized world.
Lower taxes - for all!
"At the moment, the tax rates are rising a lot for people with comparatively low income," the BdSt said in a statement released on Tuesday.
The reform suggestion was outlined by the BdSt's tax policy specialist Isabel Klocke. "Any specialist employee working full-time is already in the top tax bracket if they earn 1.3 times the average salary," she told DW. "That shouldn't be - and that's why we suggest that the top tax rate should only apply for an income of over 80,000 euros a year."
That, according to Klocke, would also relieve people at the lower end of the income scale by "flattening" all the tax rates. "Especially those with lower incomes - let's say up to 35,000 euros - they would be relieved by up to 20 percent," she said. "We don't understand why politicians aren't improving Germany's tax rate, because we've been calling for that for some time."
Politicians on the same page - but not really
Angela Merkel's party, the Christian Democratic Union (CDU), has now become notorious among political pundits for continually promising tax breaks ahead of general elections.
This year has been no exception. At the start of this month, just over five months before September's election, Finance Minister Wolfgang Schäuble duly bandied around suggestions that tax relief worth 15 billion euros would be distributed in the next legislative period - potentially by raising the threshold to the top tax bracket to 60,000 euros.
But Merkel's party made similar promises during the election campaigns in 2005 and 2009 without any major tax reform transpiring during her three terms in office. "People are realizing now that it's unacceptable for this just to be promised - they're noticing that anything extra they earn is being taxed very hard," said Klocke.
"Almost all the parties are now proposing tax relief, though they have very different proposals," she added.
The socialist Left party, Germany's biggest opposition party is no exception and has already presented its proposed tax plan.
Unsurprisingly, its proposals focused on extra taxes for the rich. "Inequality is anti-social," party chairman Bernd Riexinger said in a statement. "Germany is one of four countries with the most millionaires. It easy for people with a lot of money to increase how much they have, and there is no tax on fortunes."
The Left's tax plan would significantly raise the tax rate for anyone earning over 70,000 euros a year - to 53 percent - and impose extra tax rates for top earners - 60 percent for anyone earning more than 260,000 euros a year, and 75 percent for those earning more than half a million euros.
But, as Klocke pointed out, the Left's tax plan would also go a long way to relieving the tax burden for those with an average, or even slightly better than average income - everyone earning less than 7,100 euros a month would actually see their taxes reduced, Riexinger said. "Even the Left party, which isn't known as a tax-lowering party, even they see that people need to have more money available," commented Klocke.