Tariff history of income tax in Germany

This article describes the development of the tariff for income tax in Germany since 1946, which is often referred to as tariff history. The main focus is on the tax amount function , which is used as the basis for creating tax tables or, since 2004, as a continuously variable formula rate. The marginal and average tax rates are also shown.

From tiered tariffs to medium-sized businesses to linear tariffs

Post-war period from 1946

After the end of the Second World War , the Allied Control Council decided in February 1946 to raise the top tax rate of assessed income tax to 95 percent. The tax rate was designed as a tiered limit rate :

Formula in 1952
taxable profit	Tax amount
0up to 0DM 750	0 DM0+
0 over DM 750 to DM 1,200		10% of the 750 DM ...
0 over DM 1,200 to DM 2,400	45 DM +	15% of the 1,200 DM ...
0 over DM 2,400 to DM 3,600	225 DM +	20% of the 2,400 DM ...
0 over DM 3,600 to DM 4,800	465 DM +	25% of the 3,600 DM ...
0 over DM 4,800 to DM 6,000	765 DM +	30% of the 4,800 DM ...
0 over DM 6,000 to DM 7,200	1,125 DM +	35% of the 6,000 DM ...
0 over DM 7,200 to DM 9,000	1,545 DM +	40% of the 7,200 DM ...
0 over DM 9,000 to DM 20,000	2,265 DM +	45% of the 9,000 DM ...
0 over 20,000 DM to 30,000 DM	7,215 DM +	50% of the 20,000 DM ...
0 over DM 30,000 to DM 40,000	12,215 DM +	55% of the 30,000 DM ...
0 over DM 40,000 to DM 60,000	17,715 DM +	60% of the 40,000 DM ...
0 over DM 60,000 to DM 80,000	29,715 DM +	70% of the 60,000 DM ...
0 over 80,000 DM to 100,000 DM	43,715 DM +	75% of the 80,000 DM ...
0 over 100,000 DM to 150,000 DM	58,715 DM +	80% of the 100,000 DM ...
0 over 150,000 DM to 200,000 DM	98,715 DM +	85% of the 150,000 DM ...
0 over DM 200,000 to DM 250,000	141,215 DM +	90% of the 200,000 DM ...
0 over 250,000 DM	186,215 DM +	95% of the 250,000 DM ...
		... in excess of the amount

In the government declaration of September 20, 1949, Chancellor Konrad Adenauer announced a comprehensive tax reform . The aim was to boost motivation, savings and investment. In the following years there were different approaches for tax reforms. The first finance minister of the Federal Republic was Fritz Schäffer . He thought a simplification of the tax laws was necessary. In the years after 1952, the Income Tax Act did not specify an explicit tariff, but a table from which the income tax burden could be read. At the same time the top tax rate fell and in 1955, for example, was still 63.45%.

1958 to 1989

Income tax rate from 1958 to 1964 in Germany

The first tariff documented in the BMF tax calculator dates back to 1958. The tax amount function (formula according to §32a EStG) consisted of polynomials defined in sections up to the third degree, ie the form:

 $ESt=a\cdot y^{3}+b\cdot y^{2}+c\cdot y+d\ \ \ \ \ |{\text{ mit y als Bemessungsgrundlage}}$

According to the law, from 1958 to 1964 the following calculation rule was provided for the creation of income tax tables:

Formulas for the years from 1958 to 1964
taxable profit	Formulas
0 a) up to DM 1,680	ESt = 0
0 b) from DM 1,681 to DM 8,009	Income tax = 0.2 * (zvE - 1,680)
0 c) from 8,010 DM to 23,999 DM	ESt = 1,264 + 272 * y + 2.9 * y²
	y = (zvE - 8,000) / 1,000
0 d) from 24,000 DM to 110,039 DM 0	ESt = 6,358 + 382 * y + 1.572 * y² - 0.006 * y³
	y = (zvE - 24,000) / 1,000
0 f) from DM 110,040	Income tax = 0.53 * zvE - 11,281
ESt = income tax amount, zvE = taxable income

The initial tax rate was 20 percent and the top tax rate (the highest marginal tax rate for the portion of taxable income (zvE) over around DM 110,000) was 53 percent. In 1958, the spouse splitting , which has remained unchanged to this day, was introduced with joint assessment of the two partners.

In addition, there were rounding regulations for determining the rounded ZVE. Up to 1980 the amount was rounded down to a full 30 DM if the zvE did not exceed 48,000 DM. This was rounded off to an amount divisible by DM 60 without remainder. From 1981 to 2000 this was rounded off accordingly to 54 DM.

From 1975 the formula was extended to a fourth degree polynomial, but then in the form of the Horner scheme :

 $ESt=(((a\cdot y+b)\cdot y+c)\cdot y+d)\cdot y+e$

This scheme was retained in principle until 1989. The tariff valid from 1988 to 1989 looked like this:

Formulas for the years 1988 and 1989
taxable profit	Formulas
0 a) up to DM 4,752	ESt = 0
0 b) from 4,753 DM to 18,035 DM	Income tax = 0.22 * zvE - 1.045
0 c) from 18,036 DM to 80,027 DM	ESt = (((0.34 * y - 21.58) * y + 392) * y + 2,200) * y + 2,911
	y = (zvE - 17,982) / 10,000
0 d) from 80,028 DM to 130,031 DM 0	ESt = (70 * z + 4,900) * z + 26,974
	z = (zvE - 79,974) / 10,000
0 e) from DM 130,032	Income tax = 0.56 * zvE - 19,561

These tariff formulas resulted in a strongly bulbous curve for the course of the marginal tax rate. This has been criticized since the 1960s and called " middle class belly ". From 1975 to 1989 there was also a basic tax rate of 22 percent and a top tax rate of 56 percent for parts of the income above around DM 130,000. That changed considerably from 1990 onwards.

Tariff reform in 1990 and the years after

Income tax tariff reform 1990 in Germany

In 1990, under Finance Minister Theo Waigel, a continuously linear-progressive income tax rate came into force, which had previously been enforced by Gerhard Stoltenberg . This created a tariff course without bumps and jumps. At that time the " middle class belly " that had existed since the 1960s was eliminated. There was only one progression zone with a quadratic tax amount function:

 $ESt=(p_{\text{n}}\cdot (zvE-E_{n})+s_{\text{gn}})\cdot (zvE-E_{n})+S_{\text{n-1}}$

In the progression zone, the marginal tax rate function is continuously linear. This was a great simplification compared to the previous calculation rules.

In the proportional zone, the marginal tax rate is constant:

 $ESt=s_{\text{gn}}\cdot zvE+C\ |{\text{ mit }}\ C<0$

This formula, regulated by law, can be converted into the mathematically equivalent form:

 $ESt=s_{\text{gn}}\cdot (zvE-E_{n})+S_{\text{n-1}}$

This shows that the marginal tax rate only applies to that part of the ZVE above the benchmark.

The following variables or parameters apply:

 ${\begin{aligned}ESt&={\text{Einkommensteuerbetrag}}\\zvE&={\text{zu versteuerndes Einkommen}}\\E_{\text{n}}&={\text{Einkommenseckwert der Zone n}}\\E_{\text{0}}&={\text{Grundfreibetrag (GFB)}}\\p_{\text{n}}&={\text{Progressionsfaktor in der Zone n}}\\s_{\text{gn}}&={\text{anfänglicher Grenzsteuersatz in der Zone n}}\\S_{\text{n-1}}&={\text{Einkommensteuerbetrag der vorherigen Tarifzonen}}\\\end{aligned}}$

The tables in the following sections show the parameters used in the formulas as they change over time.

1990 to 1999

The legal formulas valid from 1990 to 1995 were:

Formulas from 1990 to 1995:
taxable profit	Formulas
0 a) up to DM 5,616	ESt = 0
0 b) from DM 5,617 to DM 8,153	Income tax = 0.19 * zvE - 1.067
0 c) from 8,154 DM to 120,041 DM 0	ESt = (151.94 * y + 1,900) * y + 472
	y = (zvE - 8,100) / 10,000
0 d) from DM 120,042	Income tax = 0.53 * zvE - 22,842

The initial tax rate was reduced to 19 percent and the top tax rate (for parts of the income over DM 120,042) to 53 percent. The basic tax allowance was DM 5,616 (the equivalent of EUR 2,871 nominal).

In principle, this scheme is still valid today, but the progression zone is divided into several areas. In 1996, the basic tax allowance was more than doubled to DM 12,095 (nominally 6,184 euros) due to previously unconstitutional taxation of the subsistence level. The continuous linear course was abandoned. The legal formulas in 1996 were as follows:

Formulas in 1996:
taxable profit	Formulas
0 a) up to DM 12,095	ESt = 0
0 b) from DM 12,096 to DM 55,727	ESt = (86.63 * y + 2,590) * y
	y = (zvE - 12,042) / 10,000
0 c) from 55,728 DM to 120,041 DM 0	ESt = (151.91 * z + 3,346) * z + 12,949
	z = (zvE - 55,674) / 10,000
0 d) from DM 120,042	Income tax = 0.53 * zvE - 22,842

Animated tariff history from 1990 to 2014 with taxable income of up to 70,000 euros / year.

Animated tariff history from 1990 to 2014 with taxable income of up to 300,000 euros / year.

The initial tax rate was raised to 25.9 percent and the progression zone was now divided into two zones with different gradients.

2000 to 2006

Under Federal Chancellor Gerhard Schröder and Finance Minister Hans Eichel , the top tax rate was gradually lowered from 53 to 42 percent between 2000 and 2005. During this time, the tariff reform was postponed due to the costs caused by the flood disaster. The first discussions were about bringing forward the Solidarity Pact II, a supplementary budget or a higher value added tax. Finally, the second stage of the tax reform was postponed by one year to 2004.

The rounding rules were changed several times between 2001 and 2004. In 2001 it was rounded down to 54 DM and then added to 27 DM. In 2002 and 2003, it was then rounded down to 36 euros. As of 2004, the rounding rule with the 36 euro steps was abolished in order to improve the uniformity of the tariff. Since then, the zvE has to be rounded down to the next full euro amount. This makes the calculation rule suitable as a stepless formula tariff for control programs.

The following table shows the development of the parameters from 2000 to 2006:

Assessment period	Mathematical parameters
	Key figures of the zvE (from 2002 in euros)			Tax amounts for key figures		further parameters
	E ₀	E ₁	E ₂	S ₁	S ₂	p ₁	s _g1	p ₂	s _g2	s _g3
2000	13,499 DM	17,495 DM	114,695 DM	957 DM	37,919 DM	262.76e^-8th	0.229	133.74e^-8th	0.2500	0.510
2001	14,093 DM	18,089 DM	107,567 DM	857 DM	32,871 DM	387.89e^-8th	0.199	142.49e^-8th	0.2300	0.485
2002-2003	7,235	9,251	55.007	432	16.807	768.85e^-8th	0.199	278.65e^-8th	0.2300	0.485
2004	7,664	12,739	52.151	1,016	14,623	793.10e^-8th	0.160	265.78e^-8th	0.2405	0.450
2005-2006	7,664	12,739	52.151	989	13,990	883.74e^-8th	0.150	228.74e^-8th	0.2397	0.420

Since 2007

From 2007, under Chancellor Angela Merkel and Finance Minister Peer Steinbrück, an additional tariff level with the new top tax rate of 45 percent from 250,000 euros was added. This level was often referred to as the " tax on the rich "; However, it is not a separate tax, but part of the income tax rate.

The current formulas for 2020 are:
taxable profit	Formulas
0 a) up to 9,408 euros	ESt = 0
0 b) from 9,409 euros to 14,532 euros	ESt = (972.87 * y + 1,400) * y
	y = (zvE - 9,408) / 10,000
0 c) from 14,533 euros to 57,051 euros	ESt = (212.02 * z + 2,397) * z + 972.79
	z = (zvE - 14,532) / 10,000
0 d) from 57,052 euros to 270,500 euros 0	Income tax = 0.42 * zvE - 8,963.74
0 e) from 270,501 euros	Income tax = 0.45 * zvE - 17,078.74

The following table shows the development of the parameters from 2007:

Assessment period	Mathematical parameters
	Key values of the zvE				Tax amounts for key figures			further parameters
	E ₀	E ₁	E ₂	E ₃	S ₁	S ₂	S ₃	p ₁	s _g1	p ₂	s _g2	s _g3	s _g4
2007-2008	7,664	12,739	52.151	250,000	0.989, 00	13,990, 00	97.086, 00	883.74e^-8th	0.150	228.74e^-8th	0.2397	0.420	0.45
2009	7,834	13,139	52,551	250,400	1.007, 00	14.007, 00	97.104, 00	939.68e^-8th	0.140	228.74e^-8th	0.2397	0.420	0.45
2010–2012	8.004	13,469	52,881	250,730	1,038, 00	14,038, 00	97.134, 00	912.17the^-8th	0.140	228.74e^-8th	0.2397	0.420	0.45
2013	8,130	13,469	52,881	250,730	1.014, 00	14,014, 00	97.110, 00	933.70e^-8th	0.140	228.74e^-8th	0.2397	0.420	0.45
2014	8,354	13,469	52,881	250,730	0.971, 00	13,971, 00	97.067, 00	974.58e^-8th	0.140	228.74e^-8th	0.2397	0.420	0.45
2015	8,472	13,469	52,881	250,730	0.948.68	13,949, 00	97.045, 00	997.60e^-8th	0.140	228.74e^-8th	0.2397	0.420	0.45
2016	8,652	13,669	53,665	254,447	0.952.48	14,145.16	98,473, 00	993.62e^-8th	0.140	225.40e^-8th	0.2397	0.420	0.45
2017	8,820	13,769	54.057	256.303	0.939.57	14,228.50	99,171.82	1 007.27e^-8th	0.140	223.76e^-8th	0.2397	0.420	0.45
2018	9,000	13,996	54,949	260,532	0.948.49	14,456.83	100,801.70	997.80e^-8th	0.140	220.13e^-8th	0.2397	0.420	0.45
2019	9,168	14,254	55,960	265,326	0.965.58	14,722.30	102,656.02	980.14the^-8th	0.140	216.16e^-8th	0.2397	0.420	0.45
2020	9,408	14,532	57.051	270,500	0.972.79	14,997.68	104,646.26	972.79e^-8th	0.140	212.02e^-8th	0.2397	0.420	0.45

Development of the initial and top tax rates

The following table shows the historical development of the benchmarks as well as the entry and top tax rates in the German income tax rate. However, this information alone is not sufficient for a holistic understanding of the tax burden of the various income groups. For this purpose, in addition to the basic tax allowance , the rate profile of the marginal and average tax rates must also be considered, as shown in the graphics above for selected years.

Period		Basic allowance	Input tax rate	Start of the last tariff zone	Top tax rate	Solidarity surcharge as a% of income tax	Progression width	progression height
1934-1938	RM	600 0.	11%	50,000	64 (50)%		83.33	5.65 (4.41)
1939-1945	RM	600 0.	11%	50,000	72 (56)%		83.33	6.35 (4.94)
1946-1948	RM	600 0.	17%	60,000	95%		100.00	5.58
1948-1953	DM (€)	750 0.(383)	10%	250,000 (127,823)	95%		333.33	9.50
1953-1954	DM (€)	800 0.(409)	9%	220,000 (112,484)	80 (70)%		275.00	8.89 (8.75)
1955-1957	DM (€)	900 0.(460)	8th %	605,000 (309,332)	63.45 (55)%		672.22	7.93 (6.88)
1958-1964	DM (€)	1,680 0.(859)	20%	110,040 (56,263)	53%		65.50	2.65
1965-1974	DM (€)	1,680 0.(859)	19%	110,040 (56,263)	53%		65.50	2.79
1975-1977	DM (€)	3,029 (1,549)	22%	130,020 (66,478)	56%		42.93	2.55
1978	DM (€)	3,329 (1,702)	22%	130,020 (66,478)	56%		39.06	2.55
1979-1980	DM (€)	3,690 (1,887)	22%	130,000 (66,468)	56%		35.23	2.55
1981-1985	DM (€)	4,212 (2,154)	22%	130,000 (66,468)	56%		30.86	2.55
1986-1987	DM (€)	4,536 (2,319)	22%	130,032 (66,484)	56%		28.67	2.55
1988-1989	DM (€)	4,752 (2,430)	22%	130,032 (66,484)	56%		27.36	2.55
1990	DM (€)	5,616 (2,871)	19%	120,042 (61,376)	53%		21.38	2.79
1991-1992	DM (€)	5,616 (2,871)	19%	120,042 (61,376)	53%	3.75	21.38	2.79
1993-1994						0.00	21.38	2.79
1995						7.50	21.38	2.79
1996-1997	DM (€)	12,095 (6,184)	, 025.9%	120,042 (61,376)	53%	7.50	9.92	2.05
1998	DM (€)	12,365 (6,322)	, 025.9%	120,042 (61,376)	53%	5.50	9.71	2.05
1999	DM (€)	13,067 (6,681)	, 023.9%	120,042 (61,376)	53%		9.19	2.22
2000	DM (€)	13,499 (6,902)	, 022.9%	114,696 (58,643)	51%		8.50	2.23
2001	DM (€)	14,093 (7,206)	, 019.9%	107,568 (54,998)	, 048.5%		7.63	2.44
2002-2003	€	7,235	, 019.9%	55.008	, 048.5%		7.60	2.44
2004	€	7,664	16%	52,152	45%		6.80	2.81
2005-2006	€	7,664	15%	52,152	42%		6.80	2.80 3.00
2007-2008	€	7,664	15%	52.152 from 250.001	42% 45%		6.80 32.6	3.00 3.21
2009	€	7,834	14%	52,552 from 250,401	42% 45%		6.71 32.0	3.00 3.21
2010–2012	€	8.004	14%	52,882 from 250,731	42% 45%		6.61 31.3	3.00 3.21
2013	€	8,130	14%	52,882 from 250,731	42% 45%		6.50 30.8	3.00 3.21
2014	€	8,354	14%	52,882 from 250,731	42% 45%		6.33 30.0	3.00 3.21
2015	€	8,472	14%	52,882 from 250,731	42% 45%		6.24 29.6	3.00 3.21
2016	€	8,652	14%	53,666 from 254,447	42% 45%		6.20 29.4	3.00 3.21
2017	€	8,820	14%	54.057 from 256.304	42% 45%		6.20 29.4	3.00 3.21
2018	€	9,000	14%	54,950 from 260,533	42% 45%		6.11 28.9	3.00 3.21
2019	€	9,168	14%	55,961 from 265,327	42% 45%		6.10 28.94	3.00 3.21
2020	€	9,408	14%	57,051 from 270,500	42% 45%		6.06 28.75	3.00 3.21
Source: bmf-steuerrechner.de (website of the BMF ).

Individual evidence

↑ ^a ^b Announcement of the new version of the Income Tax Act (PDF) Federal Law Gazette I, No. 3, 1952, pp. 33–53.
↑ Klaus Tipke : An end to the income tax confusion !? - Legal reform instead of voting policy. Cologne, 2006, p. 22.
↑ ^a ^b Law on the Reorganization of Taxes (PDF) December 16, 1954, Federal Law Gazette I, No. 41, p. 393 ff.
↑ ^a ^b ^c ^d ^e ^f BMF: Tax calculation for income taxpayers
↑ ^a ^b Parmentier: "The income tax rate formulas since 1958"
↑ Klaus Tipke, ibid. P. 42
↑ ^a ^b cf. BVerfGE 87, 153 - basic allowance
↑ Stern: The Chancellor and the Flood, Nadine Schwede / DPA, July 30, 2003
↑ ^a ^b EStG 2002 (PDF) § 52 Paragraph 41 EStG
↑ Section 32a (1) EStG in the version dated January 1, 2007
↑ Section 32a (1) EStG in the version dated March 6, 2009
↑ Section 52 (41) EStG in the version dated March 6, 2009
↑ Section 32a (1) EStG in the version dated January 1, 2013
↑ Section 32a (1) EStG in the version dated January 1, 2014
↑ Section 32a (1) EStG in the version dated July 23, 2015
↑ Section 32a (1) EStG from January 1, 2016
↑ Section 32a (1) EStG from January 1, 2017
↑ Section 32a (1) EStG from January 1, 2018
↑ ^a ^b ^c ^d Law on the tax relief of families and on the adjustment of further tax regulations (Familienentlastungsgesetz - FamEntlastG) (PDF)
↑ Progression width = start of the last progression zone (euro) divided by the basic tax allowance (euro)
↑ Progression level = top tax rate (highest marginal tax rate) divided by the initial tax rate (lowest marginal tax rate)
↑ RGBl. I 1934 p. 1005
↑ RGBl. I 1939 p. 297
↑ Law No. 12 of the Allied Control Council , year 1946, edition 4, page 68
↑ Law on the Reorganization of Taxes (PDF) new tariff valid from 01.06.1953 according to Article 3 Paragraph 6 of the law
↑ limited to max. 70% of taxable income
↑ limited to max. 55% of taxable income

[EStG_1951-1] Announcement of the new version of the Income Tax Act (PDF) Federal Law Gazette I, No. 3, 1952, pp. 33–53.

[TIPKE_1-2] Klaus Tipke : An end to the income tax confusion !? - Legal reform instead of voting policy. Cologne, 2006, p. 22.

[EStG_1955-3] Law on the Reorganization of Taxes (PDF) December 16, 1954, Federal Law Gazette I, No. 41, p. 393 ff.

[BMF-Steuerrechner-4] ↑ ^a ^b ^c ^d ^e ^f BMF: Tax calculation for income taxpayers

[PARMENTIER-5] Parmentier: "The income tax rate formulas since 1958"

[TIPKE_2-6] Klaus Tipke, ibid. P. 42

[BVerfGE87-153-7] . BVerfGE 87, 153 - basic allowance

[8] Stern: The Chancellor and the Flood, Nadine Schwede / DPA, July 30, 2003

[EStG_2002-9] EStG 2002 (PDF) § 52 Paragraph 41 EStG

[10] Section 32a (1) EStG in the version dated January 1, 2007

[11] Section 32a (1) EStG in the version dated March 6, 2009

[12] Section 52 (41) EStG in the version dated March 6, 2009

[13] Section 32a (1) EStG in the version dated January 1, 2013

[14] Section 32a (1) EStG in the version dated January 1, 2014

[15] Section 32a (1) EStG in the version dated July 23, 2015

[16] Section 32a (1) EStG from January 1, 2016

[17] Section 32a (1) EStG from January 1, 2017

[18] Section 32a (1) EStG from January 1, 2018

[FamEntlastG-19] Law on the tax relief of families and on the adjustment of further tax regulations (Familienentlastungsgesetz - FamEntlastG) (PDF)

[20] Progression width = start of the last progression zone (euro) divided by the basic tax allowance (euro)

[21] Progression level = top tax rate (highest marginal tax rate) divided by the initial tax rate (lowest marginal tax rate)

[22] RGBl. I 1934 p. 1005

[23] RGBl. I 1939 p. 297

[24] Law No. 12 of the Allied Control Council , year 1946, edition 4, page 68

[25] Law on the Reorganization of Taxes (PDF) new tariff valid from 01.06.1953 according to Article 3 Paragraph 6 of the law

[26] ted to max. 70% of taxable income

[27] ted to max. 55% of taxable income