What I Learned From Building a Tax Simulator
When Germany’s governing coalition announced plans for income tax reform, a familiar debate started again: who pays more, who pays less, how much revenue does the government lose?
A tax simulator published by Die ZEIT made that debate unusually concrete. Instead of arguing in the abstract, people could adjust tax brackets and see the consequences. Nearly 20,000 proposals were submitted.
Reading the comments, one thing stood out: everyone wanted to tax something the tool couldn’t touch. Wealth, inheritance, capital gains, social insurance. The most popular reforms were all off the table. So I built the missing features.
The Overlooked Burden
Most tax debates focus on income tax. It’s visible, progressive, and relatively easy to explain. People see it on their pay slips, and politicians campaign on changing it.
But for many middle-income earners in Germany, social insurance contributions are actually the larger burden.
Someone earning €30,000 per year pays roughly €2,100 in income tax but about €6,700 in social insurance. At €60,000, social contributions still exceed income tax. Only at higher incomes does the relationship reverse, and the reason is contribution ceilings. Once earnings exceed certain thresholds, parts of the social insurance system stop collecting. The effective rate falls as income rises past those limits.
Income tax is designed to be progressive. Social insurance works the other way around above the ceiling. Most people I talk to have no idea the ceiling even exists.
The Revenue Argument
Using household wealth data from the ECB’s Household Finance and Consumption Survey, I estimated the revenue from a 1% annual tax on net wealth above €1 million: roughly €67 billion per year. More than Germany’s entire defense budget. Since very high wealth households are underrepresented in the survey data, that’s probably a lower bound.
I think wealth concentration is a problem, for reasons beyond tax revenue, and a wealth tax makes sense to me. The interesting questions are about design, not whether.
The Design Problem
Consider a founder who owns 40% of a successful private company. On paper, tens of millions of euros. In practice, very little cash. A wealth tax creates a real liability against illiquid wealth.
The owner can borrow, sell shares, or force distributions. None of those are necessarily desirable. And yes, the capital-flight argument comes up here, though most wealth isn’t that mobile, and other countries have managed this with reasonable design.
The harder question is what to do when someone genuinely can’t pay. One idea: defer the tax through a claim on the asset. Instead of cash, the state receives part of the future value when the asset is eventually sold, a silent stake. That solves the liquidity problem while raising new ones. Should governments become minority stakeholders in thousands of private companies? What happens if the company fails? Not impossible. Just harder than a slider.
The Incomplete Picture
Public debate tends to focus on whichever tax is easiest to see. But consumption taxes matter too. Lower-income households spend a larger share of their earnings, so VAT hits them proportionally harder. Property transaction taxes affect access to home ownership. Inheritance taxes shape how wealth accumulates across generations. Looking at only one of them gives a misleading picture of who ultimately pays.
Optimizing for Yourself
On average, the proposals submitted to the ZEIT simulator would have reduced taxes for 82% of the population while cutting government revenue by around €52 billion.
Not particularly shocking. Everyone wants someone else to pay more, preferably someone earning just a bit more than them. Tax policy is less about finding the right formula and more about competing ideas of fairness that don’t resolve cleanly.
Try It Yourself
The simulator covers income tax, social insurance, capital gains, and wealth taxes together, using the same core statistics as the ZEIT project, extended with ECB wealth distribution data.
Calculations based on German tax statistics from 2021, extrapolated to 2026. Wealth distribution from ECB HFCS 2021. Very high wealth households are underrepresented, so the wealth tax estimate is a lower bound. Behavioral responses are not modeled.