Tax debate: Nothing but tax populism | THE TIME

The discussion about higher burdens for top earners shows how irrational the financial policy debate is. And why Germany is having difficulty with reforms.

March 13, 2026, 1:38 p.m

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Article summary

Nobody taxes their entire income at the top tax rate, only the amount above it. A reform proposal proposes to only raise the top tax rate from an income of 90,000 euros and then increase it to 49 percent. The discussion about this divides the political landscape and shows the difficulties with tax reforms. The government is not planning a general tax increase, but rather a redistribution of the tax burden from top earners to small and middle income earners. The complexity and ideological differences make agreement difficult and cause reform plans to stall.

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If the increase in individual tax rates is discredited as a tax increase, then the project is doomed to failure.
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First of all: Nobody taxes their income at the top tax rate. Not even an income millionaire. At least not all of the income. The top tax rate of currently 42 percent is a so-called marginal tax rate. This means: When the tax office determines the tax liability, it mathematically breaks down the salary of an employee or self-employed person into different components, to which different tax rates are then applied.

The top tax rate only applies to the amount that is above 69,879 euros for single people. The rest of the income is taxed at lower rates, so that the actual tax rate payable is always below the top tax rate. For example, with a taxable income of 100,000 euros (which corresponds to approximately 120,000 euros in gross income), the average tax burden is 36.97 percent. You can have all of this calculated on the website of the Federal Ministry of Finance. But who does that?