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Declining Tax Progression and the German Dual Income Tax


  • Jenderny, Katharina


This paper analyzes the effect of the introduction of a final withholding tax on capital income on the progression of the German income tax. As previous literature shows, even with synthetic income taxation, tax progression was strongest in the middle of the income distribution, and decreased for high incomes. At the top, notably for the richest top 0.001 % of potential taxpayers, tax progression was not further observable. In 2009, the tax schedule changed and capital income was excluded from the synthetic income tax tariff. Instead, it is taxed at a lower final withholding tax rate. This paper explores the effect of this change on the overall progression on total income. The analysis is based on a microlevel panel dataset of income tax returns between 2001 and 2006, which provides information on the distribution of total taxable income and is particularly representative for the top of the income distribution.

Suggested Citation

  • Jenderny, Katharina, 2013. "Declining Tax Progression and the German Dual Income Tax," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80039, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc13:80039

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    References listed on IDEAS

    1. Fabien Dell, 2005. "Top Incomes in Germany and Switzerland Over the Twentieth Century," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 412-421, 04/05.
    2. Anthony B. Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Journal of Economic Literature, American Economic Association, vol. 49(1), pages 3-71, March.
    3. Thomas Piketty & Gabriel Zucman, 2014. "Capital is Back: Wealth-Income Ratios in Rich Countries 1700–2010," The Quarterly Journal of Economics, Oxford University Press, vol. 129(3), pages 1255-1310.
    4. Giacomo Corneo, 2005. "The Rise and Likely Fall of the German Income Tax, 1958–2005," CESifo Economic Studies, CESifo, vol. 51(1), pages 159-186.
    5. Stefan Bach & Giacomo Corneo & Viktor Steiner, 2009. "From Bottom To Top: The Entire Income Distribution In Germany, 1992-2003," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(2), pages 303-330, June.
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    Cited by:

    1. Zhu, Junyi, 2015. "Bracket creep revisited - with and without r>g: Evidence from Germany," Discussion Papers 37/2015, Deutsche Bundesbank.

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    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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