For a large part of the working population, performance and extra work are not worth it. Anyone who belongs to the middle class in this country has to pay an average of half of every additional euro earned to the state as taxes and social security contributions. In some income brackets, this limit is even higher, at almost 80 percent. This is shown by a current Ifo study on the distribution of the tax and duty burden in Germany commissioned by the CSU-affiliated Hanns Seidel Foundation, which is available to WELT.
There are also massive negative incentives to work in the lowest income groups, as the researchers emphasize. Economists and employers warned on Monday at the hearing of the Committee on Labor and Social Affairs in the German Bundestag on the draft law that the planned citizen's allowance, which is to replace Hartz IV from January, will exacerbate the problem again.
According to the Ifo study, for a single household with an annual gross income of between 30,000 and 80,000 euros, the state claims 40 to 53 percent of every additional euro earned in taxes and social security contributions.
Even in middle-class families with dependent children, the gap between gross and net increases with increasing income. The researchers complain that, especially when a second earner increases his or her employment, only a fraction of the additional wages ends up in the household budget, even with smaller family incomes.
Because the tax rate rises with income, workers are subject to higher and higher taxes with every salary increase. Social security contributions are also levied based on income. For the middle class, this interaction of social security contributions and progressive income tax has a particularly negative effect on performance.
But it is not only the financiers of state redistribution that have negative incentives to work. Overtime does not pay off even for low-income earners. This is especially true for single parents and couples with multiple children. Because social benefits such as Hartz IV, housing benefit and child allowance are quickly and massively reduced if you have your own income from work.
Even above 100 euros per month, only 20 cents are left over from one euro. According to the Ifo study, with a gross income of just under 20,000 euros, overtime brings nothing at all due to the lack of social transfers and the onset of taxation plus social security contributions.
According to the critics, the planned citizen's allowance, which employers as well as the CDU and CSU are up in arms about, violates the wage gap requirement massively. The standard rates should increase by twelve percent to 502 euros. More generous regulations are also envisaged for special assets and apartments. The additional income limit of 100 euros remains.
The only improvement that is planned is that between 520 and 1000 euros of earned income, 30 percent instead of the previous 20 percent will end up in your wallet. According to the Ifo Institute, the increase in the standard rates also extends the income range in which the limit burden is 100 percent.
Criticism comes from Carsten Linnemann, the deputy chairman of the CDU. “With the basic income, the incentives to work will continue to decrease, and workers are desperately needed. Our economy can't stand that in the long run," Linnemann told WELT. “I am very concerned that support for our welfare state will be lost from those who finance the welfare state with their taxes and social security contributions and make it possible in the first place.” He also supports the concept of negative income tax. "We need a system in Germany in which people who work full-time do not have to go to the social welfare office as petitioners."
Against the background of ever-increasing staff shortages, the consequences of a lack of incentives to work are fatal. Especially since the gap between gross and net will continue to widen in the coming years due to demographic changes, because premiums will rise. This, in turn, has a massive impact on the Federal Government's goal of increasing the number of women and older people in the labor market and getting more long-term unemployed people to work in order to secure skilled labour, in addition to forced immigration of workers.
If more work does not noticeably increase the household income, but mainly benefits the public coffers, the opposite effect threatens: a withdrawal from the labor market.
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