3784495988

8 Mikroekonomia

BANK I KREDYT styczeń 2008

or morę, The WTC is withdrawu at 37% of gross income mice income excee<ls 5,220 pouuds per year. In addition to tliat, parents cau also apply for childcare credits to support their childcare expeuses. A couple to be eligible for the childcare credit ueeds to have both parents workiug at least 16 hours per week.

2.2. Germany

Income Taxation

In theory. the German income łax is based on the principle of compreheusive income taxatiou. That means that the sum of a households income from all sources is taxed at a single ratę after several deductions have been applied. In practice, there are various exceptious to this rule, however, especially regarding the taxation of Capital income and pensions. Since the begiiming of the 1990s, households have been paying, in addition to the standard income taxes, the "Solidaritaelszuschlag' - a tirae limited tax supplemeut implemeuted iu the course of the German reuuification. For the year of iuterest, the year 2005, the supplemeut amouuts to 5.5% of the standard income tax. Auother distingnishing featnre of the German tax system is the principle of joint taxatiou of households, whereby the income tax of a married couple is calculated by applyiug the tax fuuctiou to half of the sum of the spouses* iucomes; this amount is then doubled to determiue the tax amount of the couple.³

Corueo (2005) provides an historical overview of income taxatiou in Germany and shows that sińce the mid-1980 progressivity of income taxation has dedined. Duriug the 1990s the German government implemeuted several minor refonns slightly reduciug margiual tax rates and increasing the basis tax allowance. These refonns, however, are not comparable to the effect of the Tax Reform 2000 which detenniues the tax Schedule iu 2005. The Tax Reform 2000 rednced the margiual tax rates for all households. For a single household, the chauges in margiual tax rates are relałively similar up to about 50,000 euros of taxable income. However, when

taxable income reaches the top margiual tax ratę the

gains from the tax increase. This is due to the large drop of the top margiual tax ratę from 51% to 42%. On the lower end, the increase iu the tax allowance excludes households with taxable income below 7,664 euros from taxation. Before the reform, in the fiscal system of 2000, this threshold was at 6902 euro. Both, the increase in the tax allowance, and the decreasing margiual tax rates lead to a lower average tax ratę over the entire distnbution of taxable income.

Iu addition to taxes, working people pay social security coutributious (SSCs). These include, iineiiiployment (6.5% of gross earuings) and healtli insurauce (about 17% of gross earuings) and pensum contributions (19.5% of gross earuings). In generał, employerand employee pay half of the contributions. The so called Mini/Medi-Job program excludes households with earuings lower tlian 400/800 euros from the SSCs.

Transfer System

The German transfer system consists of several different income-support programs. These programs have different iaiget gronps and vary iu their design, hi generał.

the German transfer system cau be characterised as a traditional welfare system. Most benefits are targeted to individuals out of work, and the benefits are mostly withdrawu as soou as people start working. This implies that at the bottom of the earuings distribution, the margiual tax rates are very high. sometnnes close to 100%. Except for a very minor program, the child supplemeut, iu Germany there are no transfer programs conditional on work, soch as in the UK or in the US. Next, we will briefly discuss the features of the maili transfer programs. Iu this analysis we exclude the Insurance liased uncmployment benefits (ALG I). Uuemployed, who have worked for morę than 12 mouths over the last tliree years, ipialify for ALG I. This is a temporary benefit which depends on the previous uet-earuings (60% of previous net income for a household without children). As ALG I is financed by the social security contributions of the working population it has a differeut character than the generał tax financed transfers and is therefore excluded (roni this analysis.

•    Arbeitslosengeld II (Social Assistance, ALGII): ALGII is a meaus-tested benefit. The basie amount for a single household is 345 euros for West and 331 euros for East Germany. A partner receives slightly less than 311 euros (West) aud 298 euro (East) and for children the basie amount is roughly 200 euros depeudiug on age and region. In addition to the basie amount, the household receives support for housing and lientmg. Thus, the major part of housing benefits is iucluded iu ALGII. ALGII is means-tested against all sources of income - taxes and social security contnbution are deducted - iucludiug child benefits and maintennnee payments. The withdrawal ratę varies betweeu 70% aud 85% and above 1,200 euros per month (1,500 euros per month for those with children) the withdrawal ratę is 100%. ALGII is only targeted at households which are ready to take up work. Households with iudividuals who are not part of the labour force, receive Sozialhilfe. The design of Sozialhilfe is very similar to ALGII with a slightly different withdrawal ratę. The maiu difference is that in theory households cau loose their eligibility for parts of ALGII when they are not actively looking for a job. IIowever, this depends very much on personal and regional circuinstances.

•    Kindeigeld(Child Benefit): Households receive child benefits for all children younger than 18 years. Children up to the age of 27 are eligible if they are