Plea for a Realistic Income Tax Rate Structure

Prior to Germany’s national elections last autumn there was a far reaching consensus among political parties that the tax burden on taxpayers with low and medium-sized incomes had to be reduced. The main weakness at the moment is the gaping discrepancy between the way in which the tax rate is presently structured and real developments in income, as well as an appropriate, realistic standardisation of the expenditure necessary to secure a basic existence through the basic tax-free allowance. Dieter Dziadkowski, former member of the scientific staff on the Finance Committee of the German Bundestag, outlines a proposal for a simple and fair income tax rate. The current rate needs to be corrected in the areas of basic income allowance, tax bracket thresholds, the lower income tax threshold, as well as the intermediate tax rates between the lowest and top taxation rate. An ongoing evaluation of tax rates should also be conducted at least every two years based on the “rolling tax rate.”