A statement made by a user under a news article claims that 50 % of all taxes are paid by 'rich people' being defined as making more than 70.000 €/a.

(...) 2% der "Reichen" zahlen 50% der Steuern in Deutschland. (...)

This freely translates into:

2% of "the rich" pay 50% of the taxes in Germany.

statement

Can this be backed up?

I could not find any reliable sources but I'm also not very good with statistics and stuff :)

  • 40
    It's not a notable claim if some random guy posted it in a forum. It's also not well defined. The vast majority of taxed is paid by companies so are the 2% the owners of these companies? – FooBar Sep 24 at 7:30
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    "The rich people", "Of all taxes..." -- Both terms are so woefully weak that it will be nearly impossible to answer ("correctly"). Who is "rich people"? By income? By wealth? What is "wealth", exactly? What is "all taxes"? Income tax, property tax, VAT is more or less a given, but the latter will be hard to get exact numbers for. How much of business tax or capital tax payed by companies controlled by individuals is calculated as "being payed" by said individual? What about inheritance tax, how do you figure that? – DevSolar Sep 24 at 7:35
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    @OddDev: No, it's not "well defined" as stated in the question. The claimant is not talking about "all the rich in Germany", he's talking about "the [top] 2%". Also, there is no mention of "by income" in the claim, which leaves the question "what about rich-by-capital" open. – DevSolar Sep 24 at 7:39
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    Ah, see? The reading that he's actually talking about 2% of the rich has escaped me. But anyway, I wouldn't approach his reasoning from the numbers perspective at all, because that would just lend credibility to the larger sociological statement being made (which is bogus). – DevSolar Sep 24 at 7:55
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    @DevSolar Then I think the claim itself is too sloppy and confused to be a good claim. I've pointed out a similar (much clearer) claim from the UK. And I disagree that it is worth analysing such claims as they are a big issue in setting tax policy the details of which are rarely understood by the public. – matt_black Sep 24 at 9:21
up vote 60 down vote accepted

Not true for "taxes", not even true for "income tax" alone.

According to the official government statistics for the year 2014 –– and include those a bit more who are not really considered "rich earners" with "just" making over 125.000 EUR –– we arrive at: the top 3% of earners were paying 20.3% of overall revenues from income tax in 2014.

From 250.000 upwards we have only 0.6% of all taxpayers left in that bracket paying 9.9%.


What is in the claim?

As written (2 % of 'the rich' pay 50 % of taxes in Germany) this is not true no matter how you spin it. The top 10% of income earners do pay a substantial amount in taxes, true. But that is by far not the whole story to it. Their share in carrying the state finances as a whole is much smaller than this number implies and the actual burden put on their shoulders is even quite low. There are quite a number of ways to legitimately try to look at this problem, circumnavigating the inherent weaknesses of several statistics available, unavailable, studies inferring those missing variables and combining them into several sets. It's still in the eye of the beholder, most of the time. Only this oversimplification will seldom appear as a correct solution to most questions.

Keep in mind that the very rich are very few and that most taxes in Germany are either flat taxes like value added tax or capped at a maximum to be considered for taxation somewhere along the line. (Compare "Einkommensteuer und Sozialabgaben in Abhängigkeit vom Bruttolohn" in: Martin Beznoska & Tobias Hentze: "Die Verteilung der Steuerlast in Deutschland", iw-trends, Vierteljahresschrift zur empirischen Wirtschaftsforschung, Vol. 44, No 1, 2017 p105. (PDF))

enter image description here

How the tax revenues were structured over the last years:

enter image description here
Source DIW, 2016 (full ref see below, p 43.)

The big chunk at the bottom is VAT, a flat tax for everyone.

And what is the claim actually referring to? If 2% of people cashed in 50% of all the wealth, money and income generated, then the result of 2% paying 50% of the taxes sounds almost like a perfect system?

Only that the claim makes it sound nearly scandalous and has no frame of reference. Even generously taking into consideration all those possible frames not mentioned in the claim into the analysis in trying to approach a favourable outcome for the claim, that will just not materialise. Simply put: The rich pay less overall taxes than to be expected, and the highest percentiles in yearly earnings do not contribute that much to the overall income tax revenue that the claim asserts.

The statistics just don't give that result from the claim. This is right-wing spin, often repeated. But usually this is claimed with a bit more precision. Like "10 % of 'the rich' pay 50 % of the overall income taxes in Germany" or the like. But even that is only marginally better and almost never backed up by anything. To put a comment from under the question on its feet: But the claim is indeed about tax policy, it is about "hey, we rich pay all the taxes, so shut up about inequality", "and lower the taxes already"… –– Who carries the weight, who can carry how much? And the details of these statics can be interpreted in more than one way.

Drawing from the right leaning Stefan Bach, Martin Beznoska, Viktor Steiner: "Wer trägt die Steuerlast in Deutschland? –– Verteilungswirkungen des deutschen Steuer- und Transfersystems", Deutsches Institut für Wirtschaftsforschung, 2016.

Data in this study is based on several different years between 2008 and 2016. The use of household equivalent income already distorts the findings as "rich" is an accumulated measurement not accessible by German statistics and the measure chosen only tackles gains, officially registered gains.

Nevertheless: In that study some interesting relations are revealed:
We see that the top 10% earners receive 38.5% of all earnings without transfers (p40).
We see that the lowest 10% of earners contribute 0% to income tax.
We see that the highest 10% of earners contribute 21.5% to overall income tax revenue. (p48)
We see for 2015 that the top 10% of earners cash in 26% of all generated and registered income, and the same bracket contributed 34.1% of all direct taxes but only 29.3% when it comes to "taxes and social security".
The top 1% of earners cashed in 5.2% of all registered income and payed 8.5% of all taxes and 5.1% of all taxes and social transfers collected (p51).

Another interesting tidbit is found in income from capital like dividends. The top 10% get 90% of all capital income, from that group the top 1% alone cash in 81.2% of all dividends and the top 0.1% of the richest earners alone siphon up 60.8% of all dividends (p57). Naturally any tax from this kind of wealth simply does not apply at all to the lower classes.

Some of these measurements are based not on actual hard data but inferred calculations and assumptions. The most important distinction to observe here is that the spectrum was analysed using deciles of household equivalence income. That means that the income bracket "the top 10%" in the last few paragraphs do not represent 10% of all people paying taxes –– but a much smaller number of taxpayers whose actual number is not inferable from the report alone.

Looking from another angle, we see that the lowest 5% had to give up 19.5% of all the money they had to the state in the form of indirect taxes. While the top 1% only burdened their registered money with 5.7% (p53).

Another spin on the claim would be the "top 50 percent pay 95 percent of the tax" like Bild newspaper did some time ago. Or like the FAZ did with "10 Prozent zahlen 50 Prozent".

Even if that claim is really just about the income tax, without making it explicit, is that actually true, too? Then the answer is quite clearly: no. But what percentage do the rich pay?

Unfortunately, this cannot be calculated in a simple manner and there are no official statistics to be read with a clear answer. Fortunately we have the Rheinisch-Westfälisches Institut für Wirtschaftsforschung e.V. (RWI). The researchers have looked at an extensive study from the year 2011.

The top 50 percent actually pay in income tax 95 percent of the total. But that's not the only tax. For the main indirect taxes – VAT, car tax and energy tax – the proportion of the top 50% of households drops to 69 percent. Now it goes on. The total tax revenue from wage and income tax amounted to 186 billion euros. The Revenue from VAT (excluding import VAT) as well as value added tax and car tax amounts to 189 billion euros. Makes a total of 375 billion euros.

That means then: The top 50 percent pay a total of 81 percent of the tax revenue.

The calculation: 95 percent of 186 billion is 176 billion and 69 percent of 189 billion results in 130 billion. That makes up 306 billion euros. And that's 81 percent of 375 billion euros. (Strictly speaking, an aggregation is problematic for reasons of data material but it is an approximation here). Social security contributions are not even included in this calculation, but the picture is not likely to change significantly.

One important thing to consider: Is that really much or little? It sounds like much or a very great amount. But: it depends on what relation the tax burden is to income. If – an extreme case – the poor do not make money, they cannot contribute to the financing of the State either. The top 50 percent united now around 80 percent of the total income. So one could say that 80 percent of the income also bear 80 percent of the tax burden. Somehow it doesn't sound like the rich fleeced.

On the contary. The lowest economic part cannot contribute much from the start. The highest earners profit from flat taxes like VAT and have many possibilities for legal tax avoidance. Plus illegal tax evasion. If the topic is taxes, social security financing has to be included, even if it is not legally defined as a tax, it is one in effect. Then the picture changes drastically. In terms of load and in terms of absolute value the middle part contributes much more than the claims about rich people paying almost all implies.

For indirect taxes, this is quite impressively illustrated:

enter image description here

"The rich" can or could pay much more, as they are much less effected from such a burden. The changes in laws in the last 25 years were almost exclusively to lower the burden on the rich.

Source: Boris Beimann, Rainer Kambeck, Tanja Kasten and Lars-H. Siemers: "Wer trägt den Staat? Eine Analyse von Steuer- und Abgabenlasten", RWI Position #43 vom 1. April 2011.

enter image description here enter image description here enter image description here enter image description here enter image description here enter image description here enter image description here

Take a close look at the first table (Tabelle A1) from that report. According to that calculation the top earners above 200.000 EUR a year account for a 14.92% share in total income tax revenue. The next table groups earners into deciles and concludes that the top ten percent share 54% of total income tax revenue.
This measurement comes closest to the claim for income tax alone without being anywhere near the exaggerated simplification from that claim.
While that might sound favourable for the claim after all, the third table demonstrates that those earning more than 200000 only contribute 0.87% collected indirect taxes; for total indirect and social security transfers

Changes over the years of different kinds of taxes as they contribute to the overall budget in comparison:

enter image description here Source: Patrick Schreiner: "Hohe Einkommen und Vermögen tragen immer weniger zum Steueraufkommen bei" 2011 (High incomes contrinbuting less and less to overall tax revenues)

Keep in mind that wage tax is not the same as income tax. The rich pay income tax, the not-rich wage tax. First bar is income tax, second bar is wage tax (pleae excuse this gross oversimplification).

Even as the claim talks about just "taxes" and probably means the popular income tax alone, in 2014, these were the actual numbers:

| Gesamtbetrag der Einkünfte
von ... bis unter ... Euro  
             Festzusetzende Einkommensteuer
                          Steuerpflichtige1 %   1 000 Euro  %   1 000 Euro  %



        0 bis     5 000   6 374 157 16,0      8 631 019  0,6       259 465   0,1
    5 000 bis    10 000   2 955 585  7,4     22 368 802  1,5       400 466   0,2
   10 000 bis    15 000   3 487 809  8,7     43 539 063  2,9     1 238 878   0,5
   15 000 bis    20 000   3 311 670  8,3     57 849 449  3,9     3 295 750   1,3
   20 000 bis    25 000   3 215 109  8,0     72 281 639  4,9     5 747 972   2,2
   25 000 bis    30 000   3 058 430  7,7     84 048 742  5,7     8 263 692   3,2
   30 000 bis    35 000   2 846 944  7,1     92 383 922  6,2    10 631 447   4,1
   35 000 bis    40 000   2 400 220  6,0     89 786 044  6,1    11 477 449   4,4
   40 000 bis    45 000   1 971 904  4,9     83 617 111  5,7    11 569 119   4,5
   45 000 bis    50 000   1 615 041  4,0     76 586 609  5,2    11 315 230   4,4
   50 000 bis    60 000   2 408 535  6,0    131 693 741  8,9    20 942 523   8,1
   60 000 bis    70 000   1 648 521  4,1    106 666 593  7,2    18 452 475   7,1
   70 000 bis   125 000   3 444 235  8,6    308 844 865 20,9    63 556 292  24,5
  125 000 bis   250 000     939 545  2,4    153 978 461 10,4    42 351 177  16,3
  250 000 bis   500 000     195 852  0,5     65 052 086  4,4    21 515 213   8,3
  500 000 bis 1 000 000      47 000  0,1     31 325 922  2,1    11 202 738   4,3
1 000 000 oder mehr          18 999  0,0     50 722 016  3,4    17 218 553   6,6

Insgesamt 
                         39 939 556 100,0   1 479 376 081   100,0   259 438 438 100,0

If that table is hard to read, blame it on SE and look at the original at Lohn- und Einkommensteuer (DESTATIS)

Important are the last three lines:

From 250000 upwards we have 0.6% of all taxpayers in that bracket paying 9.9%.

If we add that up to the fourth line to include those a bit more who are not really considered "rich earners" we arrive at: the highest 3% of earners were paying 20.3% of overall revenues from income tax in 2014.

One important addition to all of the above is that "rich" usually means "being rich", not "earning much". Income and wage taxes simply do not tackle richness at all, but earnings. There is no wealth tax in Germany.

There are no official statistics in Germany that measure wealth accurately. The government just isn't interested in knowing that. But there are some estimates. Again using household decile grouping:

decile           estimated wealth share in %
 1.–5. 10% group  2.6 
 6.               3.4
 7.               5.8
 8.               9.8
 9.              15.2
10.              63.2
---------------------
100.00          100.00

According to that estimate the top 10% is structured as follows

top 7.5%         57.3%
top 5  %         51.0%
top 2.5%         41.4%
top 1  %         31.6%
top 0.5%         25.9%
top 0.1%         16.2%

Source for last two tables: Stefan Bach, Martin Beznoska, Andreas Thiemann: "Aufkommens- und Verteilungswirkungen einer Wiedererhebung der Vermögensteuer in Deutschland", Friedrich-Ebert-Stiftung, WiSo-Diskurs 02/2016. (PDF)

The government has its own estimates, published for example Institut für Angewandte Wirtschaftsforschung: "Endbericht an das Bundesministerium für Arbeit und Soziales „Aktualisierung der Berichterstattung über die Verteilung von Einkommen und Vermögen in Deutschland“", Tübingen, 31. August 2011. (Lebenslagen in Deutschland – Armuts- und Reichtumsberichterstattung der Bundesregierung Forschungsprojekt – Aktualisierung der Berichterstattung über die Verteilung von Einkommen und Vermögen in Deutschland) (PDF):

enter image description here
enter image description here

To compare how deciles of equivalent income and wealth are related:
In the second graphic the solid line is income, the dotted line is wealth.
Notice the different scales and how impractically skewed to even display that graphic would look like if there was just one y-axis!

enter image description here

  • 2
    Huh, so Germany has "right-wing" and I suppose "left-wing" to refer to political groups? I always assumed that was just an American thing. – JPhi1618 Sep 24 at 14:55
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    @JPhi1618 I expect pretty much every country with a parliament older than a few decades does; just be careful, it means different things in different places (if anyone can even agree on one definition in the first place). It literally comes from "these guys sat on the right in the chambers". "Left-wing" in one country can mean the same thing as "right-wing" in another, or they can be entirely or mostly orthogonal. And obviously, the Americans weren't first - both the British parliament and especially the French revolutionary parliament used this. The French were probably the first. – Luaan Sep 24 at 15:14
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    @Luaan Yeah, the term originates from the seating arrangement of the French parliament, as I recall. – reirab Sep 24 at 16:07
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    Consider that the "centre" for each country can be to the right or left of the centre in other countries. Thus, policies that are considered fairly left-wing in one country might be considered moderate or even slightly right-wing in others. – Dancrumb Sep 24 at 16:53
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    @JPhi1618: The left/right thing is basically coming from the order of seats in parliament of the juli revolution in france, 1830 and has been propagated throughout since. Center and scale are however individual per country, many would call americas two parties being right wing, the other just much righter. – PlasmaHH Sep 25 at 8:33

The top 20% of income earners pay 50% of Einkommensteuer&Lohnsteuer (income tax), which in turn accounts for 33% of total tax income for the state. (Lohn and Einkommen are separate here, because Lohn references income from paid employ, while Einkommen can be any monies you get apart from paid employ)

People with more than 37 500 € per year paid 80% of the income tax, while people with less than 23 000 € paid 4%.

To frame this another way: the poorest 10% of households paid 20% of their income as indirect tax (combining with direct taxation to 20%) while the richest 10% of households paid 8% of their income as indirect tax (combining with direct taxation to 20%) (Berliner Zeitung, citing a study by DIW)

So no, not even close.

enter image description here

Sources:

  • 5
    What about other taxes? – Communisty Sep 24 at 8:11
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    I think you're missing a 0 in your second paragraph; I suspect it should be 23.000€ not 23.00€. As an aside, it's probably worth noting that in English, it's typical to use . as the decimal separator, and , or space as the thousands separator, so you might want to change it to 23,000 (or 23000) and 37,500 (or 37500) respectively while you're editing. – Michael Kjörling Sep 24 at 14:12
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    " the poorest 10% of households paid 20% of their income as tax (any tax) while the richest 10% of households paid 8% of their income as tax (any tax)" I find this highly dubious. Mind to check your math and phrasing ? At least I would like to see how/where you found that. – ElderBug Sep 24 at 18:51
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    Some conclusions here are wrong although the pie chart is nice. For example, the poorest 10% of households pay zero income tax. Also, income tax starts at 14%, not 20%. Due to progression, you have to go a long way to reach 20% overall. Further, paying Umsatzsteuer is proportional to "being rich", and this is a share as large as Lohnsteuer. Lastly, some tax, notably Grundsteuer and Grunderwerbsteuer is almost exclusively paid by "the rich" (which also pay for dysproportionally more insurances). Same for Abgeltungssteuer and Ertragssteuer. The poor have a share of zero on these. – Damon Sep 24 at 19:03
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    @Damon: "Grundsteuer ist umlagefähig" So technically, rich landlords have to pay this tax, they just use poor tenants' money. – Eric Duminil Sep 25 at 6:41

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