Germany has the second-highest tax burden among OECD countries, but not all age groups pay the same amount of taxes and social contributions. A recent study by the Organisation for Economic Co-operation and Development (OECD) examined who pays taxes and who receives benefits from the welfare state. According to the study, young people benefit primarily from public services in education and health, which often outweigh the financial contributions they make in the form of taxes and social security contributions. However, as they enter the workforce, the balance shifts, and they end up paying more to the state than they receive. This trend peaks between the ages of 50 and 55, with German citizens in this age group paying an average of €20,500 in taxes and social security contributions annually.
The study also found that as people enter retirement, the benefits they receive from the state outweigh the payments they make. This is due to factors such as pensions and increasing healthcare costs. As the population ages, this poses a problem for the state budget, and the study’s author, Martin Beznoska, believes that social security systems need to be reformed urgently. The study highlights the need for a balanced approach to taxation and social contributions across all age groups, as well as the importance of reforming social security systems to ensure their sustainability in the face of demographic changes.
In conclusion, the study by the OECD and the IW sheds light on the complex relationship between taxes, social contributions, and benefits in Germany. While young people benefit from public services, they end up paying more to the state as they enter the workforce, with the trend peaking in middle age. As people enter retirement, the balance shifts again, with benefits outweighing payments. This poses a challenge for the state budget, and urgent reforms are needed to ensure the sustainability of social security systems in the face of demographic changes.
