The Effective Burden on Earned Income of Different Household Types since 1986

This study examines how the effective income tax burden for various household types in Germany evolved between 1986 and 2021. Using the ifo microsimulation model and taking into account the development of real incomes, we show that the average burden from income tax and solidarity surcharge declined sizeably. A slight increase in social security contributions can partially offset this trend. These findings hold for all household types under consideration and along the entire income distribution. Our results are relevant for an evidence-based discussion about future income tax reforms.