How high is the tax rate

Increase in the tax rate since 2004: the drivers behind taxes

Tax rate: increased in the medium term, constant in the long term

The share of the state's tax revenue in the value of domestically produced goods and services as measured by gross domestic product has been fairly constant over the long term - in contrast to the social contribution rate, which has risen significantly since the 1960s. Since 1960 the tax rate has fluctuated between 20 and 25 percent. Only in the early 2000s was it just below that.

Since 2004, with interruptions caused by the financial crisis in 2009 and 2010, the figure has always risen by 19.5 percent. In 2017, the tax rate of 22.4 percent was higher than it has been since the fall of the Wall.

Absolute increase: driver income tax

The total annual tax revenue increased nominally by around 291 billion euros between 2004 and 2017. Slightly more than half of the nominal increase was accounted for by income from personal income tax (sum of wage tax, assessed income tax, withholding tax, non-assessed income tax and solidarity surcharge).

Income from sales tax increased nominally by almost 90 billion euros. The remaining eight taxes, which are the largest according to their revenue, generated revenues of 186 billion euros in 2017, an increase of almost 60 billion euros compared to 2004.

Relative increase: Real estate transfer tax leads the way

On average, tax revenues increased by 66 percent from 2004 to 2017. Of the ten types of tax with the highest revenue, however, some are well above this growth rate and some are well below it.

Income from real estate transfer tax rose the most in relative terms, by 180 percent. The increases in the property transfer tax rate by most countries since 2007, the rise in house prices in recent years and the higher transaction volume contributed to this.

The above-average increase in corporation tax, income tax and trade tax can be explained by the current boom. The employment rate is high, the companies are busy and so the taxable income of the two production factors labor and capital are correspondingly high.

Tax rate: level and recent increase rather underestimated

Taxes such as the Renewable Energy Surcharge Act are not legally a tax. Because the income is passed on directly to the service provider and does not end up in the general budgets of the federal, state and local governments. They are therefore not included in the tax rate considered.

However, from a consumer perspective, the distinction between a levy and a tax is not particularly relevant. These are always compulsory payments to the state, which in the best case scenario are offset by services that are valued higher than the compulsory payments made. The EEG surcharge has increased from a nominal 3.6 billion euros in 2004 to 26 billion in 2017, which are not taken into account in the tax rate.

Spending priority, efficiency and tax cuts

Real tax revenues per person are currently higher than ever before. Nevertheless, complaints can be heard about the quality of the services provided in areas in which the state is in the lead - for example with regard to education, transport infrastructure or childcare.

The reference to perceived such abuses should not be combined with calls for higher taxes. Instead, it would be appropriate, on the one hand, to question the government's spending priorities - mother's pension, retirement age 63, pension package and childcare allowance are not particularly helpful in terms of education, infrastructure and childcare and are certainly not investments in the future. The political will seems to be the binding restriction with regard to future expenditure, not the amount of tax revenue.

On the other hand, the focus should not be on inputs. The decisive factor is not how many resources the state uses, but what it creates with the resources. If the tax rate were today at 21.3 percent - the average since reunification - taxpayers could already use over 36 billion euros more purchasing power annually according to their ideas. Perhaps the state would then use the resources that it has left in a less wasteful way - that is, more efficiently.
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