What percentage of the income goes into taxes?

Tax calculator: how much you pay the state and what you get back

Politicians want to relieve the citizens because the tax burden is too high for many. But how big is it really for an average household? A new tax calculator provides information.

SPD leader Norbert Walter-Borjans wants it, FDP chairman Christian Lindner wants it, Federal Minister of Economics Peter Altmaier (CDU) also wants it: The middle class in Germany should be relieved quickly and the tax burden should decrease.

Many citizens would like that too. More and more people complain that they have less net than gross. But is that actually true? How much exactly do Germany's citizens pay the state - and what do they get in return from it?

The Cologne Institute for Economic Research (IW) has now investigated this question. In a new study, which the institute connected to an interactive computer (see below), the IW illustrates how strong the redistribution is in Germany.

The calculator is for households, not people

"We wanted to meet the current debate on redistribution with facts," says Martin Beznoska, author of the study. "With our calculator, we give taxpayers the opportunity to find out about the average taxes directly." For any gross annual income, the calculator answers two questions:

  1. How high is the annual income compared to the other households in the income distribution?
  2. How much of this annual income does the average household pay to the tax authorities - and how much does it get back from the state in the form of transfer payments, pensions and similar payments?

The special thing about the calculation: In addition to income tax and transfer payments such as unemployment benefits, the study authors also take into account factors such as the average VAT, alcohol or tobacco tax paid per year. "The payments made and benefits received need not apply to every household," says Beznoska. "We initially used the average values ​​for the respective income group as a basis for our calculation."

In plain language: The calculator is only suitable to a limited extent for drawing conclusions about your personal life situation. However, it does convey a feeling for the standard of living and the share of the state's funding, according to Beznoska.

Single household with 50,000 euros gross pays around 9,000 euros to the state

A reading example: A single without children, who receives an annual gross income of 50,000 euros, transfers an average of 25,375 euros to the state annually. In addition to income tax, this sum includes contributions for health insurance, unemployment and pension insurance, as well as the average value added tax paid.

At the same time, average single households with the same annual income get an average of EUR 16,274 back from the state. This includes transfer payments such as unemployment benefit I, Hartz IV, basic security or student loans.

Not all households receive these government grants. For example, some people have not yet received any pensions because they are still working. Because pensioners also fall into the income group (50,000 euros gross per year), the calculator initially shows a pension payment of 1,929 euros. The same applies to people who receive unemployment benefits or who receive parental benefits.

If you add up the average taxes paid and the average transfer payments received from the state, the result is a balance of 9,101 euros. In other words: Average single households with an annual gross income of 50,000 euros finance the German state with a little more than 9,000 euros per year.

Information on income distribution

In relation to the rest of the population, single households with such an income are still doing well. Only 24 percent of the population have more net than gross and thus achieve a higher standard of living. 76 percent of all households are worse off. On average, they have less money in their pockets.

For comparison: a three-person household with two adults and one child with the same income only achieves a higher standard of living than 38 percent of the rest of the population - 62 percent of households are better off. What is also noticeable: A three-person household with an annual income of 50,000 euros receives on average almost 4,600 euros more from the state than it pays in taxes and other charges, so it is a net recipient.

How do you stand with your income compared to the rest of the population - and how much does your income group finance the state? Find out by using the IW Köln calculator.

In addition to information on taxes and transfer payments for the respective income groups, the study also provides general insights into state income redistribution. The most important results at a glance:

  • On average, 54 percent of households pay more than they get: Households with incomes in the bottom 46 percent of the income distribution are therefore net recipients. According to this calculation, a single without children only becomes a net donor from an annual gross income of EUR 31,500, those who earn less receive money from the state on average.
  • The mechanisms of redistribution work: The tax burden rises continuously with increasing income. The top 1 percent of income pays an average of 39 percent of income to the tax authorities. But since people in the highest income group still receive transfer payments from the state, for example parental allowance, the net burden here is on average 38 percent.
  • The poorest pay relatively high taxes: Households with incomes in the bottom 10 percent of the distribution receive the most transfer payments. However, they pay an average of 22.1 percent of their income to the state in the form of taxes, significantly more than many households with a middle income. Among other things, this is due to the fact that VAT is the same for everyone: those who are poorer are burdened with a higher percentage.

How to use the tax calculator
Where are you on this scale? How does your income compare to the rest of the population? You can find out with the IW Köln computer that was created for the new study.
To do this, you must state the gross annual income of your household, i.e. the total income of all people living in your household. Also, how many people over and under the age of 14 live in your household. The calculator shows you how your household compares to other households. What it doesn't show is how your personal income compares to the rest of the population.
You can also see how much a household that is comparable to your standard of living is contributing to the financing of the state, i.e. how high the taxes and payments are that a comparable household with the same income receives or pays.
So do not be surprised that taxes and payments are also shown that you do not actually receive. The graphic here only shows an average value for comparable households - this also includes pensioners, unemployed people or families. That is why payments such as student loans, child benefit or basic security in old age can also be found in it.

But what does all this mean for the middle class? IW economist Beznoska has a clear opinion: "The burden on the middle class has grown significantly in recent years." This is mainly due to the fact that the income tax limits have not been adjusted. "Politicians must counteract this and raise income tax limits." The so-called middle class belly, i.e. the tax burden on lower incomes, must be flattened, says Beznoska.

For the study, the IW Cologne worked with data from the Socio-Economic Panel, a repeated survey of households in which income is also regularly recorded. The data on indirect taxes such as VAT, alcohol or tobacco tax come from the Income and Wealth Survey (EVS).

more on the subject

  • Subjects:
  • Taxes,
  • Income tax,
  • Federal Ministry of Finance,
  • Energy tax,
  • Levy,
  • Tax expenses,
  • Tax relief,
  • Christian Lindner,
  • Hartz IV,
  • Germany,
  • CDU