Abstract

Cumulative Effects of the Levies and Transfer System

Model analyses confirm what has long been asserted in the political and scientific debate: Owing to the imperfect co-ordination of levies and the transfer system, especially due to the great diversity of applied income definitions, income limits and relevant income periods in levies and transfer law, extreme marginal burdens on income may result and in individual cases genuine overturn effects can probably not be excluded. Thereal problematical area, however, is themedium income bracket into which more and more employees are moving up. It is characterized by.coincidence of progressive income tax and degressive transfer entitlements with the outcome that the cumulated effects of the tax and transfer system result in no small number of cases in critically high marginal burdens. In amending the income tax rate table attention will have to be given to counteracting this coincidence of burdens precisely in the medium income bracket. Total co-ordination of the levies and transfer system, as occasionally called for in the scientific domain, would appear, however, to be neither feasible nor meaningful. The net balance or curve of the marginal burden is only an assessment criterion for the efficiency of the levies and transfer system. To try to express this yardstick in absolute terms would be to misjudge the numerous independent objectives of the various transfers and of tax law. In our multi-tier transfer and levy system, it will continue to be necessary in the future to seek ever and again a compromise between objectively appropriate solutions and simple arrangements. And in the process attempts will continually have to be made to ensure that arrangements that are individually perfectly sensible do not interact to produce implausible results.