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Top Incomes and Top Taxes in Germany

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  • Stefan Bach
  • Giacomo Corneo
  • Viktor Steiner

Abstract

We analyze the distribution and taxation of top incomes in Germany during the 1990s on the basis of individual tax returns data. We derive a measure of economic income from taxable gross income as reported in the tax returns. Thanks to complete sampling, we can deliver a very precise description of very high incomes, in terms of both distribution and composition by source. We also provide a measure of the effective average rate of taxation for various income groups. Our main findings are as follows: (i) incomes are highly concentrated in Germany, more than commonly thought; (ii) the German economic elite relies much less than elites in France or the US upon income from wages and salaries; (iii) income taxes are highly concentrated in Germany, more than commonly thought; (iv) although effective tax rates are significantly lower than statutory ones, the income tax is effectively progressive; (v) income taxation substantially reduces income inequality in Germany.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1641.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1641

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Keywords: income distribution; personal income tax; taxing the rich;

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References

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  1. Emmanuel Saez, 2004. "Reported Incomes and Marginal Tax Rates, 1960-2000: Evidence and Policy Implications," NBER Chapters, in: Tax Policy and the Economy, Volume 18, pages 117-174 National Bureau of Economic Research, Inc.
  2. Fabien Dell, 2005. "Top Incomes in Germany and Switzerland Over the Twentieth Century," Journal of the European Economic Association, MIT Press, MIT Press, vol. 3(2-3), pages 412-421, 04/05.
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Citations

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Cited by:
  1. Martin Jacob & Rainer Niemann & Martin Weiss, 2008. "The Rich Demystified - A Reply to Bach, Corneo, and Steiner (2008)," CESifo Working Paper Series 2478, CESifo Group Munich.
  2. Roine, Jesper & Vlachos, Jonas & Waldenström, Daniel, 2007. "What Determines Top Income Shares? Evidence from the Twentieth Century," Research Papers in Economics, Stockholm University, Department of Economics 2007:17, Stockholm University, Department of Economics.
  3. Horn-Chern Lin & Tao Zeng, 2010. "The distributional impact of income tax in Canada and China: 1997-2005," Journal of Chinese Economic and Foreign Trade Studies, Emerald Group Publishing, Emerald Group Publishing, vol. 3(2), pages 132-145, June.
  4. Baclet, Alexandre & Dell, Fabien & Wrohlich, Katharina, 2005. "Income Taxation and Household Size: Would French Family Splitting Make German Families Better Off?," IZA Discussion Papers 1894, Institute for the Study of Labor (IZA).
  5. Roine, Jesper & Vlachos, Jonas & Waldenström, Daniel, 2007. "The Long-run Determinants of Inequality: What Can We Learn from Top Income Data?," Working Paper Series, Research Institute of Industrial Economics 721, Research Institute of Industrial Economics, revised 30 Apr 2008.
  6. Stefan Bach & Giacomo Corneo & Viktor Steiner, 2008. "Effective Taxation of Top Incomes in Germany, 1992-2002," CESifo Working Paper Series 2233, CESifo Group Munich.
  7. Corneo, Giacomo, 2008. "Charity and redistributive taxation in a unionized economy," Labour Economics, Elsevier, Elsevier, vol. 15(5), pages 831-843, October.
  8. Stefan Bach & Giacomo Corneo & Viktor Steiner, 2007. "From Bottom to Top: The Entire Distribution of Market Income in Germany, 1992 - 2001," Discussion Papers of DIW Berlin 683, DIW Berlin, German Institute for Economic Research.
  9. Frank Fossen & Viktor Steiner, 2009. "Income taxes and entrepreneurial choice: empirical evidence from two German natural experiments," Empirical Economics, Springer, Springer, vol. 36(3), pages 487-513, June.
  10. Heijdra, B.J. & Ligthart, J.E., 2006. "The Transitional Dynamics of Fiscal Policy in Small Open Economies," Open Access publications from Tilburg University urn:nbn:nl:ui:12-199394, Tilburg University.
  11. Fossen, Frank M. & Steiner, Viktor, 2006. "Income Taxes and Entrepreneurial Choice: Empirical Evidence from Germany," IZA Discussion Papers 2164, Institute for the Study of Labor (IZA).
  12. Peter Haan, 2007. "Intertemporal Labor Supply Effects of Tax Reforms," Discussion Papers of DIW Berlin 669, DIW Berlin, German Institute for Economic Research.

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