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Kiel Institute for World Economics Kiel Working Papers, Kiel Institute for World Economics

No 1304:
Der deutsche Einkommensteuertarif: Weiterhin eine Wachstumsbremse?

Achim Boss, Alfred Boss and Thomas Boss

Abstract: The structure of income taxation in Germany implies that the marginal and the average tax rates will rise in the course of the coming years—even if the increase of nominal incomes is modest. The elasticity of the wage income tax revenues with respect to gross wages amounts to about 1.9, assuming that average wages rise by 1.5 percent per year; such wage increases would probably mean that real wages remain constant. The rising tax rates impair the incentive to work and dampen the growth of potential output. Regular tax rate cuts would seem to be necessary to avoid bracket creep. Indexation of the income tax system might be a real option for economic policy.

Keywords: Marginale und durchschnittliche Lohnsteuerbelastung, Aufkommenselastizität, heimliche Steuererhöhungen, Indexierung; (follow links to similar papers)

JEL-Codes: H24; (follow links to similar papers)

23 pages, December 2006

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