As cold progression in becomes more observing and by the tax progression more conditionally only over several years - rise of material fiscal charges designates.

The obvious "“cold progression"”

If the income tax tariff is not continuously adapted, leads one inflation compensation-end increase in revenue because of the progressively running income tax tariff to a control item and with it to a larger tax burden, although equal net real income remains.

Example: From 1975 to 1989 the average gross income of an employee from 14.472 rose "€ to 28.668 "€, inflation compensation contained in it lies with 7.727 "€. Since the framework data (basic free allowance and marginal tax rate) were unchanged in these years and the amount, starting from which the maximum tax rate seizes, was, rose with constantly approximately 66,480 "€ the control item of 25,6% to 32,3% related to the income adapted to the cost of living. Thus a higher tax burden is connected of 1.476 "€ - only related to the year 1989 -.

The hidden "“cold progression"”

A reason for the progression in the Einkommensteuerrecht is the politically wanted rearrangement. Therefore not only an absolutely higher tax amount but also a relatively higher tax burden are imposed upon to the economically stronger one.

By those, beside which inflation compensation also material rising income (above all also within the wage range) have itself sharpening and an average income of 1980 to 1999 doubled, while the point, at which the highest tax rate is reached, remained alike. This means however that ever more taxpayer into a higher control item "“grow"”, although its economic efficiency did not increase, because the real income did not rise.

Removal possibility

The hidden tax increase by the cold progression is to be avoided by the introduction of an automatic and regular adjustment of the tariff system in the Einkommensteuerrecht with connection of the tariff to the purchasing power development.

In Switzerland legal connections of the legislator to a periodic reconciliation of the cold progression (kind 128 exp. 3 BV, kind 39 DBG) exist. As soon as the price increase cumulated is appropriate for 7 per cent over the last conditions, the tax schedule must be adapted.

See also

• Inflation
• Income tax tariff
• Standard tax

Related links

• Information of the Interkantonalen commission for tax clearing-up
• Lecture foil of the University of Magedeburg

Articles in category "Cold progression"

We found here 63 articles.

Related Websites

We found here 3 related websites.

• Cold Progression and its Effects on Income Distribution
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  SSRN-Cold Progression and Its Effects on Income Distribution by Burkhard Heer, Bernd S


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