Finanzfluss|31. Mai
The "worst" salary in Germany...
This video from Finanzus analyzes at which salary level in Germany the incentive to earn more is lowest. The focus is not on the lowest salary or the highest absolute tax burden, but on the highest marginal tax rate – i.e., how much of each additional euro earned is deducted in taxes and social contributions.
Marginal Tax Rates in Germany- Progressive Taxation: The tax system is progressive. The higher your income, the higher your tax rate. The basic tax-free allowance is €12,348 (tax-free). The top tax rate of 42% applies from €69,879, and the wealth tax rate of 45% applies from €277,826.
- Solidarity Surcharge Adjustment Zone: Between about €76,000 and €116,000, the gradual reintroduction of the solidarity surcharge increases the marginal rate to approximately 47%.
- Social Security Contributions: These are capped (contribution assessment ceilings). This creates two new peaks of maximum marginal rates:
- Around €69,000: Here, the cap for health and long-term care insurance is reached. The marginal rate is about 50%.
- Between €94,000 and €101,000: Here, the solidarity surcharge zone and the pension insurance contribution cap overlap. The marginal rate peaks just under 53%.
- Mid-Job Range (up to €2,000 gross/month): The transition from a mini-job (tax-free) to full social insurance liability is very steep. Up to 62% of pay raises in this range are deducted.
- Basic Income Support (Bürgergeld): The reduction of basic income support as you earn your own income creates a de facto marginal rate of up to 100% for low incomes. Essentially, every additional euro earned is offset by a reduction in benefits.
- Parental Allowance Cliff: For couples with a combined taxable income over €175,000, the entire entitlement to parental allowance (Elterngeld) is lost. This is a true cliff, as earning just one euro more can eliminate the entire benefit.
- Clearly: An income so low that you are eligible for basic income support or fall below the mid-job threshold of €2,000 gross per month. Here, the financial incentive to work more is minimal. A significant jump above these thresholds can be worthwhile.
- For Higher Incomes: The highest hurdles are located around the contribution assessment ceilings (approx. €69,000 and €94,000 – €101,000). Despite the high marginal rates, a pay raise always results in a higher net income.
- Important: A high marginal tax rate can also mean that reducing your working hours (e.g., by 20%) has a smaller impact on your net income (only about a 15% reduction).
