A Simulation Method to Measure the Tax Burden on Highly Skilled Manpower

31 Pages Posted: 7 Sep 2004 Last revised: 14 Aug 2008

See all articles by Christina Elschner

Christina Elschner

ZEW – Leibniz Centre for European Economic Research

Robert Schwager

Center for European Economic Research (ZEW); University of Magdeburg

Date Written: 2004

Abstract

A model is presented for simulating the tax burden on highly skilled manpower. The effective average tax rate, defined as the relative wedge between total remuneration and disposable income, is computed. Income and payroll taxes and social security contributions not yielding an equivalent benefit are taken into account. The compensation package consists of cash payments and old-age provision. To integrate retirement benefits and their tax treatment, an inter-temporal approach is used. The results indicate that Germany and France have higher tax burdens than the UK and the USA, that Germany grants the strongest tax relief for families, and that occupational pension plans are favourable in all countries.

Keywords: Personal income tax, highly skilled employees, effective tax burden, pensions

JEL Classification: H24, H21, H55

Suggested Citation

Elschner, Christina and Schwager, Robert, A Simulation Method to Measure the Tax Burden on Highly Skilled Manpower (2004). ZEW - Centre for European Economic Research Discussion Paper No. 04-059, Available at SSRN: https://ssrn.com/abstract=586403 or http://dx.doi.org/10.2139/ssrn.586403

Christina Elschner (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Robert Schwager

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany
00 49 621 1235160 (Phone)
00 49 621 1235215 (Fax)

University of Magdeburg

Universitätspl. 2
PSF 4120
Magdeburg, D-39106
Germany

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