The stress and redistribution effect of the tax and transfer system in Germany is always a point of contention in the political debate and is vital in the assessment of economic policy measures. Important questions that are continually discussed are: Is the tax system progressive? Pay taxes the Rich enough? Who funded and to what extent the tasks of the state? Who benefits from the redistribution the most?
While the income tax is progressive – so her average tax rate increases with the level of income – have indirect taxes such as value added tax in General, a regressive effect, that is, the lower the income, the higher the average load. This is because the VAT consumer spending to a fixed percentage charged and the recipients of lower incomes consume a higher proportion of their income. These two types of taxes have the opposite effects. The social contributions, some of which have direct claims to future payments from the state to the contrary (for example, claims on the Statutory pension insurance), have the highest impact on the results in the middle range of the income distribution.
pensions are an important part of the income
On the other hand, received from the state monetary transfer services. The pensions of the Statutory pension insurance are the volume of an important part of the entire gross income of the private households, because they occur in all sections of the income distribution. It divides the households along the income distribution into ten equal parts, starting with the 10 per cent income of the poorest households in the 1. Decile and ending with the 10 percent of households with the highest income in the 10. Decile, the share of pensions in income is almost 43 per cent, in the 3. Decile is the highest. Subsequently, the importance decreases in the higher Deciles again. The pensions, however, are more likely to find themselves in the top half of the distribution and have the highest share in the 9. Decile. The unemployment benefit I (ALG I) is quite widely distributed, with a focus in the middle Deciles. However, needs-tested benefits, such as the ALG II and the age at the bottom of the distribution of important sources of income.
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the results of The net consideration paid taxes and social contributions on the one hand, and received monetary transfers, on the other, show that the efficiency is principle and redistribution in Germany works. The households in the bottom half of the distribution receive, on average, higher payments from the state as to this discharge. With increasing income, households contribute more net to the financing of the state and the burden effect of the tax system remains progressive. While for the households in the lowest decile, after deduction of taxes and fees at the average of 35 percent of income are net of transfer payments, households in the top decile 34 percent net to the state. About the author
Martin Beznoska Economist for financial and tax policy at the Institute of the German economy. Among his research topics include tax policy and redistribution.
Although the indirect taxes are regressive in relation to income, however, it will be taken in the case of recipients of social benefits, mostly implicitly by the state (by increasing the transfer). Wage earners at the bottom of the income distribution, not always to their benefit claims (for example, housing benefits). An increase in the utilization by the beneficiaries could also lead to for these households a relief. In the case of some indirect taxes, the state takes the regressive burden effect, however, is aware, since these are supposed to have a steering effect on the behavior. For this purpose, the tobacco include, for example, tax and alcohol tax.
