Hello all,
today a little thought experiment.
Even though we at getquin are probably in a comparatively liberal bubble, I would be interested in your thoughts on the subject of taxes.
Primarily, I'm referring to the topic of income taxes with the corresponding subtypes such as capital gains taxes etc.
What would your "desired model" for taxes look like, which would still not cause massive losses in tax revenues?
About the data:
Median income Germany among employees subject to social security contributions 44,074€ (1).
About 6.6 million people received social assistance or basic benefits in 2022. (Incl. top-ups, benefits for asylum seekers, etc.) (2)
My idea in a nutshell would be the following:
Pensions: No taxation up to 50% of the median income of employees subject to social security contributions.
The idea: the current cost of living for pensioners tends to be lower than for employees. Especially for health measures, there are many different subsidies that can be accessed to reduce the individual burden.
Furthermore, exemption limits for co-payments etc. are calculated primarily on the basis of taxable income.
Salaries:
Tax allowance for income from non-self-employed work of just under €10,000 raised to 50% of median income.
Employees usually have more opportunities to increase their salaries than pensioners and are therefore subject to a lower basic tax allowance in percentage terms. At the same time, they are able to reduce their real tax burden more than retirees due to income-related expenses, etc.
Part-time workers can thus de facto be further relieved and in some cases even exempted from tax.
This helps single parents in particular and strengthens the incentive not to rely on a main earner in the family. (This is a dying model, but quite common in my non-representative circle. There, most of the female partners who take care of the children say that it is not worth working because the taxes are too high).
Furthermore, the higher basic tax-free allowance also massively increases the incentive to work compared to welfare recipients, since you can keep more of your money and thus massively increase your prosperity in contrast to "social parasites" (deliberately overstated).
Especially on the topic of incentives to work as opposed to encouraging a lack of motivation to work, I see extremely high opportunities for society.
Even unskilled workers are constantly sought, but not found, because the salaries and taxes partly push or bring one to the income level of a welfare recipient.
On the subject of social welfare, by the way, I assume a simplified model of the one-third rule.
1/3 does not want to work
1/3 cannot find (acceptable) work
1/3 cannot work at all (health reasons)
Investment income:
Tax exemption after a holding period of 20 years (FiFo).
Abolition of capital gains taxes and taxation of capital gains below the holding period at the personal income tax rate.
Tax allowance from current 1,000€ high to 5% of median income. (So about 2,200€)
What is the assumption behind the 5% of median income?
As median income rises, the savings rate would rise in parallel. In order for corresponding savings measures to be worthwhile for distributing variants, the tax-free amount should also increase accordingly.
By linking it to the median income, an increase in income can also provide direct relief in the case of profit realization.
2,200€ tax allowance is currently required for a dividend yield of 5% ($SPYD ), i.e. 1.87€ per share per year, an invested capital of almost 41,200€.
So almost exactly one year's median income.
Renting&leasing:
Still subject to regular income tax with appropriate allowances and opportunities to reduce tax burden.
"Rich tax rate":
Even if it doesn't go down well here in the Bubble, I am personally a very big fan of the wealth tax, i.e. the German additional top tax rate....
Currently, the wealth tax kicks in at a gross income of 277,826€ for singles and is 3% more than the highest income tax rate, so 42% + 3% = 45%.
Funfact: If one assumes only the income taxes, Germany is with the tax even behind the USA. The Scandinavian countries are also happy to take advantage of high incomes. Here one has to pay partly 56% income tax.
Belgium and Portugal also have higher "taxes on the rich.
My assumption here would be:
Increasing tax burden for incomes up to 5 times the median income. (At 5 times the median income, even the top salaries of chief physicians in 2021 would not be covered by the wealth tax. (3))
Beyond that, a 10% special tax would apply. (So from the amount that exceeds the 220,000€ gross income EXCEEDS.)
Why is now more strongly slammed at high incomes:
On the one hand, the relief for "lower income groups" must be financed. At the same time, I also see the social responsibility of high earners in the Federal Republic. Social contributions are capped very quickly in some cases. (Conversely, of course, pensions will also be capped at some point).
However, despite higher taxes, high earners also have far more opportunities to maintain and increase their wealth.
(Personally, I consider certain salaries to be extremely exaggerated and far removed from reality. Sure, a VW executive can earn good money if the numbers are right. However, the sums that are sometimes called up there are simply absurd for me, as they bear little relation to the performance in the company. I know: Strategic planning/alignment and leadership are extremely important in companies, as they represent the basic framework for successful processes and only with good planning can a company operate successfully in the long term and in a stable manner. My personal attitude towards professional athletes or actors is similar).
We see it here in the community itself:
The first few hundred euros sometimes turn out to be difficult, but once you have invested a few thousand euros, compound interest picks up extremely and the assets grow extremely.
This effect can be further leveraged by appropriate capital flows.
What are your ideas on the subject of income taxes?
(1) https://www.stepstone.de/e-recruiting/wp-content/uploads/2022/02/Gehaltreport-2022-1.pdf