In 2022, approximately 3.2 million taxpayers in Germany were subjected to the top tax rate of 42 percent. According to data released by the Federal Statistical Office (Destatis) on Wednesday, this group represented 7.4 percent of all taxpayers who had taxable income. These taxpayers accounted for nearly 30 percent of total incomes, generating €621 billion, and contributed close to half (49 percent) of the entire income tax revenue, amounting to €186 billion. Their average annual income was €196,000.
Germany employs a progressive tax system, meaning the tax burden increases as income rises, leading to varied levels of taxation among citizens. In 2022, the income threshold for the top tax rate was set at a taxable annual income of €58,597 (or €117,194 for jointly filed couples). It is important to note that the top rate is applied only to the income exceeding this specific threshold, not to the entire income.
A smaller group-about 141,000 of the 3.2 million top-rate taxpayers-reported an annual income exceeding €277,826 (or €555,652 for joint filers). For this higher tier, the maximum tax rate, known as the “wealth tax,” was 45 percent in 2022. This group made up 0.3 percent of all unrestricted taxpayers and accounted for 7.6 percent of all incomes and 15.3 percent of the total tax amount.
Comparing 2022 to 2012, the share of taxpayers in the highest bracket increased significantly from 5.4 percent to 7.4 percent. As part of a progression report, the income tax tariff in the Income Tax Act has been regularly adjusted for inflation since 2016, annually raising the thresholds at which the top rates apply. Following the initial slowdown caused by the onset of the COVID-19 pandemic, this increase has since moderated. In 2022, these top-bracket taxpayers accounted for 49 percent of the total income tax revenue, compared to 42 percent in 2012.
Overall, taxpayers in Germany generated a total income of €2.1 trillion in 2022. This represented a rise of €127 billion, or 6.5 percent, compared to the previous year. The combined total of wage tax withheld by employers and income tax assessed by tax authorities for 2022 reached €376 billion, marking an increase of €19 billion (5.2 percent) over 2021.
