Facing the general election in 2013, the level of the income tax is a major issue of the economic policy debate in Germany. The paper presents data on the income tax burden in the period 1958–2012. The data refer to specific levels of real income as well as to specific levels of income in...

It is argued that the German system of supporting low wage income earners by government transfers gives incentives for employers and employees to contract low wages and then to exploit the government. The paper analyses if such incentives do exist. It turns out that this is the case under...

Based on a description of the German system of taxes and transfers, the incentives to work are analyzed for several groups of the labor force. The effects of the “Hartz IV” reform (effective from 2005 onwards) on the incentives receive particular attention. It turns out that the marginal...

Subsidization policy is intensively discussed in Germany. The paper demonstrates the extent of subsidization in Germany. Subsidies are defined as the sum of tax expenditures and those government expenditures which distort the structure of the economy; financial aid is granted to different...

It is often proposed that capital income tax rates be harmonized. Otherwise, a “race to the bottom” will occur and lead to governments not being able to perform their usual tasks. However, the development of corporate income tax revenues in relation to GDP does not indicate that a race to...

Subsidization policy is intensively discussed in Germany. Subsidies comprise by definition tax expenditures and those government expenditures which distort the structure of the economy; financial aid is granted to different branches by the EU, the federal government, the states (Länder) and the...

Due to labor market reforms in Germany some years ago, the incentives to work changed. The paper analyzes the effects on the reservation wages for specific groups. It is assumed that reservation wages are determined by the replacement rates implied by the system of unemployment benefits and by...