Der deutsche Einkommensteuertarif: Wieder eine Wachstumsbremse?

The structure of income taxation in Germany implies that the marginal and the average tax rates will rise significantly in the next years - even if the increase of nominal incomes is modest. The elasticity of the wage income tax revenues with respect to gross wages amounts to about 1.86, assuming that wages on average rise by 2 percent per year; such wage increases would probably mean that real wages hardly rise. The rising tax rates impair the incentives to work and dampen the growth of potential output. Regular tax rate cuts are necessary to avoid bracket creep. Indexation of the income tax system might be the solution. Copyright 2007 die Autoren Journal compilation 2007, Verein für Socialpolitik und Blackwell Publishing Ltd.