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Top Incomes and Top Taxes in Germany

Discussion Papers 532, 30 S.

Stefan Bach, Giacomo Corneo, Viktor Steiner

2005. Nov.

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We analyze the distribution and taxation of top incomes in Germany during the 1990s on the basis of individual tax returns data. We derive a measure of economic income from taxable gross income as reported in the tax returns. Thanks to complete sampling, we can deliver a very precise description of very high incomes, in terms of both distribution and composition by source. We also provide a measure of the effective average rate of taxation for various income groups. Our main findings are as follows: (i) incomes are highly concentrated in Germany, more than commonly thought; (ii) the German economic elite relies much less than elites in France or the US upon income from wages and salaries; (iii) income taxes are highly concentrated in Germany, more than commonly thought; (iv) although effective tax rates are significantly lower than statutory ones, the income tax is effectively progressive; (v) income taxation substantially reduces income inequality in Germany.

Stefan Bach

Research Associate in the Public Economics Department

Viktor Steiner

Head of Department in the Public Economics Department

JEL-Classification: H24;D31;H26
Keywords: Income distribution; Personal income tax; Taxing the rich
Frei zugängliche Version: (econstor)