The German tax and social welfare system is a complicated network featuring six different tax classes and numerous quirks involving how residents pay tax, make contributions to their health and social insurance, and receive state-funded benefits and services.
So who is putting the most tax money in and who is benefitting the most from services?
A new study from the Institute for the German Economy sought to answer this question, and put together the results in an interactive graph.
Welche Abgaben Menschen unterschiedlicher Altersgruppen und Hintergründe durchschnittlich leisten und welche staatlichen Leistungen sie bekommen (neues Projekt mit @mbeznoska und @chrtze für das @iw_koeln): https://t.co/n7TQuqIoa4 pic.twitter.com/B96rqtKC83
— Johannes Christ (@Joh_Christ) February 21, 2022
Researchers looked at the average contributions and benefits people in Germany made and received according to their age, gender, and education in 2021.
On the government revenue side, they considered what people paid in income tax, VAT while shopping, contributions to health, pension, and unemployment insurance – along with taxes on property, tobacco, and alcohol.
For services citizens and residents received, the study tallied up what German governments spend on everything from daycare and schools to pensions, health expenditures, and child allowances.
People with a university education, on average, provided the biggest surplus to the state coffers. This group generates annual government revenue of around €355 billion, while receiving €220 billion in transfers, benefits, and services. Meanwhile, people with vocational training paid in about €450 billion and received €435 billion. Those without vocational training received €125 billion compared to the €80 billion they put in.
Perhaps obviously, the greatest differences can be seen across age groups.
Up until about age 24, the average German resident receives considerably more from the state than they put in—mostly through schooling. At that age, that ratio roughly equalizes. From that point on, the total value of services the average German resident receives stays fairly consistent, as fewer receive schooling but more begin getting child benefits.
The amount of annual tax paid then steadily climbs before reaching a high point in the mid-50s. That’s the age when the average taxpayer in Germany is generating the greatest surplus for German governments—putting a net figure of around €14,000 more in than they take out.
From there on, contributions fall and benefits increase sharply. For example, the average 75 year-old receives almost €18,000 more in benefits than they contribute to government coffers – as health and pension costs rise over time.
Study author Martin Beznoska says that, given these figures, Germany’s ageing population will become a bigger concern for state treasuries. “Because of demographic change, it is becoming increasingly urgent to reform our social security systems.”
The study also found significant differences based on both gender and region. Women tend to pay less tax than men due to earning less on average. Meanwhile, the average 54 year-old in western Germany will contribute around €21,300, compared to the average 54 year-old living in eastern Germany, who contributes €15,400.
Tax – (die) Steuer. This can include income tax (Einkommensteuer), VAT (Mehrwertsteuer) or property tax (Grundsteuer), for example.
Insurance – (die) Versicherung. This can include health insurance (Krankenversicherung) or pension insurance (Rentenversicherung), for example.