ifo Institute / EconPol Europe: Germany’s Middle Class Has One of the Highest Tax Burdens in Europe

In a European comparison, the tax and contribution burden for middle-class incomes is highest in Denmark, Belgium, Germany, Finland, Lithuania, Slovenia, and the Netherlands. By contrast, France, Poland, Italy, Luxembourg, Sweden, and Austria impose average tax burdens on their middle classes, while the tax burden for the middle class is lowest in Spain, Greece, Estonia, Portugal, Cyprus, Bulgaria, and Romania. These are the findings of a study conducted by the ifo Institute and EconPol Europe on behalf of the Hanns Seidel Foundation.

“In EU member states, the tax and transfer system is generally less of a burden on middle-class families than on singles,” says ifo tax expert Florian Dorn. The countries differ, however, in whether families with one or two earners receive more tax relief.

In a European comparison, middle-class incomes are highest in Luxembourg, Denmark, Finland, Austria, and Sweden and lowest in Eastern European countries. The middle classes in Bulgaria and Romania are at the bottom, but the cost of living in these two countries is also only half the EU average.

Taking into consideration differences in purchasing power, the middle class in Luxembourg, Austria, Germany, and Finland can buy the most with their income. The purchasing power of the middle class in Eastern Europe is the lowest, but the gap with Western Europe narrows when price levels are taken into account.

The study examines and compares the income, purchasing power, and tax burden of the middle classes of EU countries. For the purposes of the study, the middle class is defined as households that earn between 75 and 200% of their country’s median income.