“If you work, it’s your own fault” is a bar-stool line, and as such it is refutable. The question only becomes interesting once you reduce it to what can be quantified: how much of gross pay an average earner keeps, how early the highest regular tax rate bites — and how both have shifted over the decades. This article works that through against the OECD statistics, the income tax schedule and Annex 1 to Book VI of the Social Code. It also names the three points at which the popular version of the argument contradicts its own sources.
What is left of gross pay
The most reliable figure on this question comes not from political argument but from an annual OECD survey comparing 38 countries on identical methodology. Taxing Wages 2026 reports two measures for data year 2025 that are routinely confused — and the difference decides whether a claim holds up.
The tax wedge sets income tax plus employee and employer social contributions against total labour costs. The net personal average tax rate measures only what the employee hands over. Cite the first while meaning the second and you will be corrected, rightly.
| Germany | OECD average | Rank of 38 | |
|---|---|---|---|
| Tax wedge, single, no children Belgium is ahead at 52.5%; 2024 stood at 47.9% — up 1.34 points in one year | 49.3% | 35.1% | 2 |
| Net personal average tax rate, single the figure excluding employer contributions — this is the one that speaks to take-home pay | 38.7% | 25.1% | 3 |
| Take-home share of gross, single the inverse of the row above | 61.3% | 74.9% | — |
| Tax wedge, one earner, two children children cut the burden by 14.4 points in Germany, by 8.9 across the OECD | 34.9% | 26.2% | 9 |
| Net rate, one earner, two children take-home 78.7% against 85.3% across the OECD | 21.3% | 14.7% | 9 |
Two observations that are rarely read together.
The gap is wide, but the top spot belongs to Belgium. Germany ranks 2nd on the tax wedge, not 1st — “only Belgium does worse” is accurate for this household type and should be left standing as such. On the employee-only burden Germany moves up to rank 3, and there the distance from the average is most telling: 13.6 percentage points.
The composition is unusual. In Germany, income tax and employer contributions together account for 64 percent of the wedge, against 77 percent across the OECD. The remainder — the disproportionately large part — falls on employee social contributions. The German peculiarity is not primarily income tax but what comes off the payslip alongside it.
The threshold that drifted down
The second half of the question concerns not the level but the point at which the highest regular marginal rate takes hold. It is worth recalculating, because the figures in circulation are not clean.
The top rate of 42 percent applies in 2026 from taxable income of EUR 69,879 (section 32a of the Income Tax Act). Provisional average contributory earnings under Annex 1 to Book VI stand at EUR 51,944 for 2026. In 1990 the threshold was DEM 120,042 against average earnings of DEM 41,946 in the western states.
| Threshold | Average earnings | Multiple | |
|---|---|---|---|
| 1990 income tax schedule 1990, in force 1990–1995; western states | DEM 120,042 | DEM 41,946 | 2.86× |
| 2000 reference year in the series | — | — | 2.11× |
| 2010 reference year in the series | — | — | 1.70× |
| 2020 reference year in the series | — | — | 1.46× |
| 2026 2026 average earnings are provisional under section 69(2) of Book VI — a downward revision would raise the ratio | EUR 69,879 | EUR 51,944 | 1.35× |
The cleanest evidence: a frozen threshold
The threshold for the 45 percent rate carries the argument better, because it raises no definitional question. It has stood unchanged at EUR 277,826 since assessment year 2022. Both the Inflation Compensation Act of 2022 and the Tax Development Act of 2024 expressly excluded it from their adjustments while shifting the other tariff thresholds.
What a nominally frozen threshold does
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Introduced in 2007
The 45% rate applies from EUR 250,001 of taxable income. Average contributory earnings stand at EUR 29,951 — the threshold sits at 8.35 times.
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Unchanged since 2022
The threshold stands at EUR 277,826 and is excluded from both adjustment acts. The denominator keeps rising.
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Position in 2026
EUR 277,826 against EUR 51,944 gives 5.35 times. Without a single change to the schedule, the threshold has fallen by roughly a third in relative terms.
The same pattern operates, more mildly, on the 42 percent threshold. From 2019 to 2026 it rose by 24.9 percent (EUR 55,961 to EUR 69,879) while average earnings rose by 32.2 percent (EUR 39,301 to EUR 51,944). The ratio fell further, from 1.42 to 1.35. Technically this is the distinction between fiscal drag in the narrow sense — the inflation effect, which has been compensated — and the real-wage component, which has not.
The commuter allowance as a test case
The distance allowance makes a useful test case, because it shows how quickly a remark in a debate turns into an assumed state of the law.
The facts run opposite to the headlines. On 1 January 2026 the allowance was raised by the 2025 Tax Amendment Act to a flat 38 cents from the first kilometre; previously it was 30 cents for the first 20 kilometres and 38 cents beyond. The federal government puts the revenue cost in full-year terms at EUR 1.1 billion for 2026, rising to just under two billion euros a year by 2030.
Four months later, in May 2026, the president of the Federal Chamber of Tax Advisers argued in a newspaper interview for scrapping it. Three qualifications belong with that:
- It is not a chamber position. The Federal Chamber of Tax Advisers itself files the episode as an interview given by its president; the demand appears in none of its 2026 press releases or technical submissions.
- The demand is conditional. The stated quid pro quo is lower tax rates for everyone instead of reliefs for some. Quoting only the first half distorts the meaning — though the compensation was never quantified.
- There is no bill. The ministerial draft of the 2026 Annual Tax Act, dated May 2026, contains no cut to the distance allowance and none to the employee lump sum.
Something else about this debate is notable, and it cuts against a common exaggeration: the distance allowance is not an instrument of high earners. According to the income tax statistics, some 13.8 million employees claimed it in assessment year 2020, on an average one-way commute of 28 kilometres. 54 percent of them had gross annual pay between EUR 20,000 and EUR 50,000, a further 30 percent between EUR 50,000 and EUR 100,000; only 5 percent were at EUR 100,000 or above.
Abolition without a quantified offset in the rate schedule would therefore hit the middle first — and within it, those with the longest journeys: the average commute is 31 kilometres in rural municipalities against roughly 24 in large cities.
What sits on the other side
The figures above describe a ratio: effort against what is left of it. Relocating does not change the effort; it changes the ratio — and by a different order of magnitude than tax optimisation within the existing structure achieves.
A self-employed person registered in Georgia as an Individual Entrepreneur with Small Business Status pays 1 percent on turnover up to GEL 500,000 a year; above the limit, 3 percent applies to further turnover from the month it is exceeded. The standard personal income tax rate is 20 percent — no progression, no solidarity surcharge, no thresholds that can drift downward. Article 82 of the Georgian Tax Code exempts income without a Georgian source for resident individuals. Contributions to the funded pension scheme are voluntary for the self-employed.
And the honest other side of the same calculation: what comes off a German payslip buys entitlements — pension accrual, health insurance, unemployment insurance, long-term care cover. In Georgia none of those accrue during that time. Health cover is bought privately, there is no equivalent of German long-term care insurance, and those arriving later in life may find no policy available at all. Reading the difference purely as a saving, rather than as a transfer of risk onto your own balance sheet, is reading it short.
What follows
“Germany punishes effort” does not hold in absolute form, and it does not become sound by being asserted more loudly. Three narrower statements do hold:
- The level of the burden is very high by OECD standards: rank 2 on the tax wedge, rank 3 on the employee-only burden, 61.3 percent of gross retained against 74.9 percent on average.
- In real — not nominal — terms the progressive thresholds bite closer to the average than they used to: the top-rate ratio to average earnings fell from 2.86 to 1.35, though on a rate cut from 53 to 42 percent and a threshold raised in nominal terms.
- The 45 percent threshold has been nominally frozen since 2022 and excluded from both inflation adjustments: from 8.35 times to 5.35 times. That is the drift without a definitional caveat.
- Not supportable: that the burden rises continuously (it is below its 2000 level), and that the commuter allowance is being cut (it was raised on 1 January 2026).
Anyone drawing a relocation decision from this should apply the same standard: worked figures rather than headlines. How the 2026 reform changes the top-end burden is set out in Tax Reform 2026: 47% Top Rate; what the state delivers for the money in State Quota 2026: Price and Performance and Bureaucracy Costs: EUR 146 Billion. The full balance sheet of leaving is in Leaving Germany: The Location Balance, the cost of going in Leaving Is Getting More Expensive. The Georgian side in detail: 1% Tax with Small Business Status, Foreign Income Tax-Free and Tax Residency in Georgia. To run the numbers yourself: Georgia Tax Calculator.
This article measures the level of the burden. Its sequel measures the shape: why the marginal burden does not rise with income but peaks around EUR 100,000, why it exceeds 100 percent in the transfer-withdrawal zone — and why Germany ranks only 15th in the OECD on the marginal tax wedge — is set out in A 53.2% Marginal Burden.
Frequently asked questions
How high is the tax burden in Germany really?
It depends which measure you mean, and the difference is substantial. The OECD tax wedge sets income tax plus both employee and employer social contributions against total labour costs; for a single person without children on average earnings it was 49.3 percent in 2025, against an OECD average of 35.1 percent. That is rank 2 of 38 countries — only Belgium is higher, at 52.5 percent. The second measure is the employee-only burden, the net personal average tax rate: it was 38.7 percent, the third highest in the OECD, against an average of 25.1 percent. A German average earner kept 61.3 percent of gross pay, against 74.9 percent across the OECD.
At what income does the top rate apply in 2026?
The top rate of 42 percent applies from taxable income of EUR 69,879 in assessment year 2026 (section 32a of the Income Tax Act). The provisional average contributory earnings figure under Annex 1 to Book VI of the Social Code is EUR 51,944 for 2026, so the ratio is roughly 1.35. In 1990 the then top rate started at DEM 120,042 against average earnings of DEM 41,946 in the western states — a ratio of 2.86. Two qualifications are essential. First, in 1990 that threshold led into a rate of 53 percent, today into one of 42 percent. Second, the threshold is taxable income while average contributory earnings are gross pay before work-related expenses and pension-type deductions — the ratio tracks the trend but says nothing about the gross salary at which someone actually reaches the top rate. In nominal terms the threshold was in fact raised: from EUR 52,882 in the 2013 schedule to EUR 69,879 in 2026.
Has the burden in Germany been rising?
In the short run yes, over the long run no — and both belong together. From 2024 to 2025 the tax wedge for a single average earner rose by 1.34 percentage points, from 47.9 to 49.3 percent. Over the longer horizon it fell: between 2000 and 2025 it dropped by 3.6 percentage points from 52.9 to 49.3 percent, while the OECD average fell by only one point. Anyone claiming the burden has risen continuously is contradicted by their own source. What holds is the narrower claim: the level is high, the gap to the OECD average is 14.2 percentage points, and last year the movement was upward.
Is the commuter allowance being abolished?
Not as things stand — the opposite happened. On 1 January 2026 the distance allowance was raised by the 2025 Tax Amendment Act to a flat 38 cents from the first kilometre; previously it was 30 cents for the first 20 kilometres. The federal government puts the revenue cost in full-year terms at EUR 1.1 billion for 2026, rising to just under two billion euros a year by 2030. The abolition demand widely reported in May 2026 came from a newspaper interview given by the president of the Federal Chamber of Tax Advisers, not from a statement by the chamber, and it was expressly tied to a quid pro quo: lower rates for everyone instead of reliefs for some. No bill exists; the ministerial draft of the 2026 Annual Tax Act contains no such cut.
Why is the 45 percent threshold the cleaner piece of evidence?
Because no definitional question stands in the way. The threshold for the 45 percent rate has stood unchanged at EUR 277,826 since assessment year 2022, and both the Inflation Compensation Act and the Tax Development Act expressly excluded it from their adjustments. While the other tariff thresholds were adjusted for inflation eleven years running, this one was frozen. Measured against average contributory earnings under Annex 1 to Book VI, it fell from 8.35 times at its introduction in 2007 to 5.35 times in 2026. That is not a model; it is a nominal constant against a rising denominator.
How does the Georgian tax burden compare?
The base is different, so the comparison shows an order of magnitude rather than a like-for-like figure. A self-employed person registered as an Individual Entrepreneur with Small Business Status pays 1 percent on turnover up to GEL 500,000 a year; above that threshold, 3 percent applies to further turnover from the month the limit is exceeded. The standard personal income tax rate is 20 percent, with no progression and no solidarity surcharge. Article 82 of the Georgian Tax Code exempts income without a Georgian source for resident individuals. Contributions to the funded pension scheme — 2 percent each from employee and employer plus a state share — are voluntary for the self-employed. The direct consequence is that no pension entitlement and no German-style health cover accrue during that time.
What is the strongest objection to the claim that Germany punishes effort?
That in absolute form it is refutable. Germany has high gross wages, high labour productivity and a strong export sector — effort is plainly being made. The tax wedge is also lower than it was in 2000. And the historical threshold comparison limps, because 1990 measured entry into 53 percent and today measures entry into 42 percent: hold the marginal rate constant at 42 percent and, on the IW Köln calculation, the ratio to average taxable income has been broadly stable since 1975. What survives is the weaker but verifiable claim: the level of the burden is very high by OECD standards, the progressive thresholds now bite much closer to the average than they used to, and the 45 percent threshold has been frozen since 2022.
This article is general information and does not constitute legal or tax advice. Figures on the tax wedge, the net personal average tax rate and country rankings follow the OECD publication “Taxing Wages 2026: The Progressivity of Labour Taxation in OECD Countries” and the Germany country note contained in it; the data year is 2025 and each household type is measured at 100 percent of average earnings. Tariff figures follow section 32a of the German Income Tax Act as applicable to assessment year 2026 and the Federal Ministry of Finance tax policy data collection 2026, tables 2.5.1 and 2.5.2; the time series for marginal and average income tax burdens and the 2013 tariff threshold follow table 2.6 of the same source. The 1990 income tax schedule applies to assessment years 1990 to 1995. Average earnings are taken from Annex 1 to Book VI of the German Social Code; the 2026 figure is provisional under section 69(2) of Book VI and may be revised, and the 1990 figure refers to the western states. Ratios to average taxable income, and the counter-calculation holding the marginal rate constant, follow publications of the Institut der deutschen Wirtschaft Köln. The distance allowance follows section 9(1) sentence 3 no. 4 of the Income Tax Act as amended by the Tax Amendment Act 2025 of 22 December 2025, and the employee lump sum section 9a; figures on case numbers, commuting distances and income distribution come from the income tax statistics of the Federal Statistical Office for assessment year 2020, published on 26 March 2025, and capture only cases above the then-applicable employee lump sum of EUR 1,000. Revenue-cost figures follow the federal government’s answer to a parliamentary question, Bundestag printed paper 21/1145, and its table of full-year effects; cash-year figures differ. The abolition demand reported in May 2026 is an interview statement by the president of the Federal Chamber of Tax Advisers and not a statement of the chamber; no legislative procedure on it is under way. Statements on the coalition decision of 2 July 2026 describe a political agreement, not law in force. Georgian figures follow the Tax Code of Georgia, in particular Article 82, the Small Business Status rules including Decree #415, and the Georgian law on funded pensions; conversions use the indicative rate of the National Bank of Georgia of 19 August 2026, 3.0265 GEL to the euro. As at August 2026; subject to changes in the law.