The Rich Demystified − A Reply to Bach, Corneo, and Steiner (2008)

The contribution Bach, Corneo and Steiner (2008) has argued that \therich" do not pay taxes adequately in relation to their income, nding, for instance, aneective tax rate of only 38.1% for the 0.001% fractile of German income taxpayers in2001. This result contrasts sharply with the legislated top marginal income tax rate of48.5%. We subject the results contained in Bach, Corneo and Steiner (2008) to a rigorousanalysis: We nd major aws and inconsistencies with regard to methodology, i.e. theomission of corporate taxes and inter-temporal aspects of taxation. Restating basicrules for the measurement of eective tax rates, we provide values for what we term the\comprehensive nominal tax rate" (CNTR) and show that the headline result in Bach,Corneo and Steiner (2008) of 38.1% is underestimated by over 12 percentage points. Asan important distributional result, the CNTR increases with increasing taxable income.