Effective Taxation of Top Incomes in Germany, 1992-2002

32 Pages Posted: 21 Feb 2008

See all articles by Stefan Bach

Stefan Bach

German Institute for Economic Research (DIW Berlin)

Giacomo Corneo

Free University of Berlin (FUB); Universität Osnabrück - Faculty of Business Administration - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Viktor Steiner

Zentrum Fuer Europaeische Wirtschaftsforschung (ZEW) - Center for European Economic Research; IZA Institute of Labor Economics

Date Written: February 2008

Abstract

We analyze the taxation of top personal incomes in Germany on the basis of an integrated data file of individual tax returns and a general household survey for the years 1992-2002. The unique feature of this integrated data set is that it includes all taxpayers in the top percentile of the gross income distribution. We show that despite substantial tax base erosion and significant reductions of top statutory marginal tax rates, German income taxation has remained effectively progressive. The distribution of the tax burden is highly concentrated, and the effective average income tax rate of the German economic elite - the top 0.001 quantile of the gross income distribution - is about 34 percent, which is well below the legislated tax rate.

Keywords: Personal Income Tax, Taxing the Rich, Effective Progressivity

JEL Classification: H24, H26, D31

Suggested Citation

Bach, Stefan and Corneo, Giacomo and Steiner, Viktor, Effective Taxation of Top Incomes in Germany, 1992-2002 (February 2008). DIW Berlin Discussion Paper No. 767, CESifo Working Paper Series, No. 2233, Available at SSRN: https://ssrn.com/abstract=1096157 or http://dx.doi.org/10.2139/ssrn.1096157

Stefan Bach

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Giacomo Corneo

Free University of Berlin (FUB) ( email )

Van't-Hoff-Str. 8
D-10785 Berlin, Berlin 14195
Germany

Universität Osnabrück - Faculty of Business Administration - Department of Economics ( email )

Rolandstr. 8
Osnabrueck, D-49069
Germany
+49 541 969 2730 (Phone)
+49 541 969 2722 (Fax)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Viktor Steiner (Contact Author)

Zentrum Fuer Europaeische Wirtschaftsforschung (ZEW) - Center for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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