The tax Mann

If I were a radio D.J., I would say that this post goes out to reader Nick Falk, who wants to learn more about German taxes. I would also like to learn more about German taxes, because so far all I know is that we pay them and they are complicated. I had to do some research, and this is what I found:

In Germany, you have to pay income tax. The American perception is that since we are living in a socialist, 'big-brother' type society where they take care of poor people and stuff, the taxes are ridiculously high. That's sort of true, since we don't know who's watching us, but the tax rates aren't as bad as you might think. Income taxes range from 14% - 44%.  The top rates are for individuals who earn more than 52,000 euros a year and couples who earn more than 105,000 and change (I won't do the math for you, but a euro is currently around $1.25, or less depending how our friends in Spain and Greece are doing). I think we paid something like 20-25% for last year's earnings.

You may remember that Brian and I had to pay the tax Mann (ha! that means man in German) at the finance office recently. This is because they looked at what we earned in the U.S. and what we earned in Germany. Then they put us in the German tax bracket for people that earn about as much as we did worldwide for the whole year.  So instead of paying tax rates for one earner working 4 months of the year, we paid the rate for one worker earning 12 months and a second earner working 6 months.  Ok fine, but could you have told us that ahead of time? Or at least warned us early enough that we could have lied to you? Or maybe I should have done this research earlier.

Other than income tax, everyone has to pay 'insurances'. These include health insurance, unemployment insurance, pension, and long-term care. If we live in Germany longer than 5 years, we can claim the pension money when we are old, no matter where we live at the time. If we live here less than 5 years, we can get it back as soon as we move.

Church tax is an interesting thing. It's optional. When you register for German residency, you have the option of listing which religion you belong to. If you do that, then you pay a church tax of 8-9% of your income. The Catholic and Protestant churches in Germany get something like 70% of their income from this tax revenue. In a place where not a lot of people go to church, I guess it's better for them than depending on unpredictable collection plates. We did not register as Catholic when we filled out our paperwork. Again, who knows who is watching us. I'd rather just throw some money in the basket and cut out the middle man. In order to receive the church tax income, the faith organization has to be officially recognized/registered in some way. That means that the Catholics and Protestants (mostly Lutheran), and the Jews (there are still a few of them) are ok, but the Muslims have trouble benefiting from the tax revenues. There are more Muslims than Jews in Germany, but they are not as well organized.

Then there is VAT - Value Added Tax. It applies to stuff that is sold and to services. The rate is 19%, but reduced to 7% for food. You never actually know you are paying it, since the rate is already included in the prices of what you are buying.

It sounds like a lot. I guess it is a lot. But keep in mind that, as Brian's dependent, I pay nothing for pretty great health insurance.

We'll have another post about what unemployment means, how the government pays you to have kids, and why scruffy people hang out by the train station with their dogs. Until then, I'll keep a low profile because someone might be following my every move.