Singles and double earners pay the most

Germany continues to be the country that has the highest taxes and social security contributions on single people and double earners. Families also pay a surprising amount.

Nice to have time off too: Couples who earn twice pay relatively high taxes.

DGermany remains the front runner among the high-tax countries even in the pandemic. Donations such as the child bonus of 300 euros and tax breaks for single parents have reduced the burden, but other countries have also gone in this direction. That is why Germany has not improved its position in an international comparison. These are the latest results of the tax investigation that the Organization for Economic Development and Cooperation (OECD) presented on Thursday. They should provide topics of conversation in the upcoming election campaign.

According to the study, which has been carried out annually for two decades, Germany continues to be the country with the highest taxes and social security contributions among the 37 OECD member countries, measured by gross income. The burden of a single person without children with an annual gross income of 61,200 euros is 38.9 percent. Income tax accounts for 18.8 percent of gross income and social security contributions 20.1 percent. Countries such as Austria, Italy and France are significantly lower.

In addition, the German tax authorities and the social security funds for families with double earners are increasing significantly. Here the OECD has deducted grants such as child benefit from the burden. According to this, Germany is – after Denmark – the country in the OECD that places the highest burden on a double-income couple with two children. Income tax and social security contributions for double earners amount to almost 30 percent of the joint gross income of around 103,500 euros. The social security contributions are twice as heavy as the income tax.

The pollution in Germany has hardly decreased

Only in families with a single earner does Germany find a place below the top group. “The main reason is spouse splitting, which lowers the tax burden,” said Michelle Harding, tax expert at the OECD. In relation to this model case (and this time including the employer’s social security contributions), Germany ranks ninth. The exposure rate here is just under 33 percent, the OECD average 24.4 percent. The average rate fell by 1.1 percentage points last year; this was the greatest reduction since measurements began two decades ago. Germany achieved a burden reduction in this category that exceeded the OECD average.

In its study, the OECD always calculates the so-called tax wedge. In doing so, it compares the costs of an employer for a job (gross salary and employer’s social security contributions) with the tax and contribution payments of the employees. For single employees with average wages, the tax wedge measures how much income the public sector “deducts” from a job in the form of the tax and social security funds. This measurement thus illuminates the monetary barriers to creating and maintaining jobs.

In Germany, the tax wedge fell by 0.28 percentage points last year, but it was still 49 percent and, as in the previous year, was the second highest burden in the OECD after Belgium. The German burden has hardly decreased over the years, because already two decades ago Germany had a pollution rate of 52.9 percent. The average value in the OECD was 34.6 percent last year, a decrease of 0.39 percentage points compared to the previous year.

Falling incomes also lead to lower taxes

On an OECD average, the pandemic has led to the largest decline in the tax burden on labor income since the financial crisis of 2008/2009. Above all, the tax burden for families has decreased. Because the governments tried to cushion the economic consequences of the Covid 19 crisis. However, falling household incomes have also led to a lower tax burden for average earners.

There are several ways to measure tax burdens. The current OECD report entitled “Taxing wages” focuses primarily on income tax and social security contributions. If, on the other hand, one takes into account all taxes and social security contributions and relates them to economic output in the form of gross domestic product (GDP), then in the OECD, at least in 2019, Denmark was the frontrunner with 46.3 percent of gross domestic product, followed by France with 45.4 percent. According to these indicators, Germany ranked eleventh with a pollution rate of 38.8 percent.