Tuesday, January 8, 2013
Ehegattensplitting - crazy German tax policy
I've written about this one before, but the issue of tax incentives for women (not) to work has come up again now that the German 2013 election campaign has begun. In a nutshell, German tax policy for married couples is such that household, not individual, income is taxed, by a rate that lies inbetween what would be the two individual tax rates (Germany has progressive taxation, i.e. the more you earn, the higher your rate is). As men usually earn more than women (in Germany 22% more on average, one of the highest discepancies in the OECD), being married to a low- or no-income earner makes sense, as the man's income is now taxed at a lower rate than if he were single. On the other hand, the woman's rate is higher if she works, so earning more or at all increases the household tax rate (as the average rate rises with the rate that the woman's income rises with), and net income therefore falls. The crazy part, I find, is that when a woman earns a bit more, and the household tax rate rises, the additional income by the woman is negated by the loss from the man's now higher tax burden. Often, the household income actually falls because the woman earns (more than before), due to this tax effect. We're not talking about a few euros a year, but thousands for most households. Add childcare costs from not being to take care of your kids, and you see what happens: women stay at home. Working as a woman is a "luxury" that many households cannot afford!
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Incredible...!
ReplyDeleteAnd in fact going against international treaties...
ReplyDeleteArticle 1 of the Convention on the Elimination of a11 forms of Discrimination against Women (1979) defines the discrimination against women as ‘any distinction, exclusion or restriction made on the basis of sex which has the effect or purpose of impairing or nullifying the recognition, enjoyment or exercise by women, irrespective of their marital status'
Being encouraged to work, as opposed to being financially punished for doing so, is definitely a question of equal 'recognition, enjoyment and exercise'!
Raising small kids at home is incredibly meaningful and rewarding BUT it's not applicable to all situations, all families, all children, or all mothers.
This is, to me, totally mind-boggling. And what is the substantiation for this policy by its proponents? Better to have women at home to raise their children?
ReplyDeleteThanks to both for your comments, and also for highlighting the Convention - will have to look into that.
ReplyDeleteThe strange thing is that there are two very differing motivations behind this tax law. One is to a) keep women at home, which enhances inequality, but the other is to b) make household income the primary determinant, which is supposed to lead to more equality (I guess it might in theory, if one would ignore reality, changes that may happen to relationships, psychology, and pretty much everything other I can think of).