I was having a discussion on another board wherein a poster was trying to decide between his current job and one with a potential $20k raise. Another poster, who I will call Hans for reasons that will soon become evident, said that might not be a good idea, because he might end up in a higher tax bracket and end up making less money overall after the raise.
I chimed in to say that graduated tax rates in the US don’t work that way. Hans responded by saying he was from Germany, and there were situations where his taxes were over 100%. Being the skeptical person I am, I went to wikipedia where I found the highest federal tax rate is 45%. Upon pointing this out, he claimed the real culprit was the social insurance fees, which screw over poor people.
He claimed that, if you make no income, the government will charge you 1920 Euro for social insurance (which makes no sense, why would you be charged when you have no income?). However, if you do make money, even 1 Euro, your insurance taxes go up to 4200 Euro, thereby causing a 420,000% tax rate.
Skeptical I was again, but he wasn’t finished.
He later claimed that he got a scholarship from the government for university, but if he earned any money at a part time job, that salary would be deducted from his scholarship money, thereby causing a 100% tax rate.
I am now incredulous, but he’s not finished.
Apparently as a student you get a waiver on the social insurance, but if you pick up a part time job, not only do you lose that scholarship, but you’ll start getting charged the social insurance, for a tax rate above 100%.
I declined to press for more details because what I was getting just seemed ludicrous to me. But, I hope it was just a language barrier question (or a particularly confused Hans). Do any Dopers have a good explanation for how the German tax system (and mandatory insurance) work? And as a bonus, how do scholarships figure into this? I did skim the Wikipedia article on German taxes, and it seemed like a standard “federal rate, state rate, and local rate” system, with a graduated set of brackets.