How Progressive is Germany? Comparing the Redistributive Effects of Tax Benefit Systems in Europe

Abstract

When comparing tax benefit systems across Europe, Germany is usually regarded as a country with a high level of taxes and contributions which is often seen as a main challenge for the economic performance of the welfare state. In this paper, we analyse the progressivity and redistribution induced by the tax benefit systems in the EUR-15 countries. We show that the German system as a whole employs only a medium level of redistribution. However, this can be decomposed into a highly progressive income tax system, a highly unequal pre-tax income distribution and regressive social insurance contributions.