Zur tariflichen Umsetzung des steuerlichen Existenzminimums

The child tax allowance and the basic tax allowance of the German income tax system have been declared by the Federal Constitutional Court as too low and thus unconstitutional. Against this background this paper provides a survey of tax instruments in OECD countries which secure tax-exemption for low-income earners. These instruments are analysed with respect to their constitutional feasability as well as their distributional and fiscal effects. Three alternative income tax schedules are compared. These use a basic allowance, a basic credit and a minimum threshold which leave the subsistence level tax free but retain the marginal tax rate pattern of the 1986/88/90 income tax reform. The quantative implications of these tax policy alternatives are examined for average employee households and for an estimated distribution of wage income in 1990.