From our Merry F****ing Christmas series.
It turns out that the blogster's off the cuff statement "if a family receives, say, 1000 euros a month in the form of this benefit, at least 100 euros (actually more like 200) of this money goes back to the state in the form of indirect taxes" in the 2013 post Hilda the Hairdresser was not far off the mark.
A new study that looked at the effective tax burden of Germans, not just the well rehashed theoretical burden listed in the various tax tables, deals a serious blow to the most beloved statement of centrists, free market liberals, and conservatives.
We'll get to the meaning of "new study" a bit later.
The gist of the statement is that the wealthy and the middle class contribute much more to the country's tax revenue than the poorer Germans.
Of course, there are different permutations of the claim, ranging from the superficially correct absolute numbers to the classist "the wealthy are carrying the burden of keeping the poor alive", with various shades of hate in between.
The Germans even have a word for those highly taxed members of the working population (middle class and up) that keep the tax coffers full: Leistungsträger (lit. those who carry the performance burden). The existing English translations are inadequate - neither "key personnel" nor "top performer" quite captures the bitterness and the condescending vibe of the term.
So, let's get the oft quoted absolute numbers out of the way.
The argument, the Leistungsträgers are paying the price of the welfare state
The top 10% of earners pay some 60% of the government's income tax revenue, and they pay some 20% of indirect taxes.
Also, income tax is progressive, the percentage paid automatically increases with income. If a pay raise is small and crosses a tax bracket, that increase can eat up the increase.
And the very poor pay no income tax at all.
Slam dunk?
Indirect taxes & how to tax a tax (not a typo)
This is where we get to indirect taxes (sales taxes, consumption taxes, various specialty taxes) combined with the many ways for better earners to lower their effective tax rates.
Lo and behold, the study says that the overall relative tax burden is very similar, or, as the centrist-conservative Frankfurter Allgemeine phrases it: more evenly distributed.
The relative effect of indirect taxes it that lower incomes are affected more severely in relative terms. If all your worldly possession for the month is 100 dollars and the government takes 10 in taxes, you hurt more than someone who has 1000 and needs to give the government 100.
German indirect taxes are much higher than US indirect taxes, skewing the German tax revenues to the detriment of the poor and the middle class.
Take sales tax (called VAT around here). The main rate on almost all goods and services is 19%, with a lower 7% rate for basic necessities, such as food.
Add too this various other taxes that make up the prices of goods and services, for example the gasoline tax that makes gas prices here some three to four times higher than in the US, and you begin to understand how even the poorest Germans end up paying more than 20% in taxes.
The blogster has marveled time and again at the brazen system of double dipping by the German government. Take electricity prices, for example. There are levies and fees (not called a tax thought they function like one) that are used to subsidize companies and (mostly) wealthy folks who can afford to add solar panels to their abodes. On top of the price consisting of base plus levies and fees, an "electricity tax" it added. On top of this, sales tax is added.
There you go, this is how you make people pay tax on another tax.
It happens a lot.
In other words: The poorest 10% of Germans contribute 5% of all indirect taxes to the government coffers, yet their share of the country's income/wages is only 3%.
The top 10% pay 20% of all indirect taxes but make 30% of all income/wages.
The picture gets even worse when you add some (not all) of the payments into the social system (healthcare, contributions to social security).
So, across all economic categories from the very poor to the wealthy, the total tax burden is between 20% and 25%.
The historical development in Germany since the late 1990s is - surprise - not mentioned in the article in Frankfurter Allgemeine, but it is in this one.
Successive German governments, "liberal" as well as "conservative", have lowered income tax rates and increased the rates of indirect taxes.
Here is the promised definition of "new study". The media really should have called it "recent". Because - as so often in the short history of this blog - the blogster is indebted to the reader comments.
One reader of Frankfurter Allgemeine said: When I studied tax law in 1972, my teacher said 'at the end of the day, everyone pays around 25%'. Ergo, nothing new under the sun.
Remember, we have not even touched other structural hurdles that affect only the poor. There is, for instance, the well studied fact that low income earners cannot take full advantage of store sales because they simply don't have the cash to buy extra supplies when stuff goes on sale. Another one is that German welfare beneficiaries who have to replace, say a broken washer, have to rely on small loans to pay off the appliance, thus paying even more indirect taxes. Though, to the credit of the German system, interest rates are not as usury as those of US payday lenders.
So, be cheerful: Merry F****ing Christmas!
[Update 12/23/2016] Fixed typos.
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