Relieving the Tax Burden of the Middle Class

Past income tax reforms have benefited taxpayers differently. To avoid inflation-induced tax increases and prevent „cold progression“ the tax relief should be spread uniformly across all incomes. One way to achieve this is by indexing the tax schedule to inflation.

That alone does not, however, compensate for the burden shifts in the past. Therefore, an income tax reform which focuses on relieving the burden on the middle-class is needed. The best way to do this would be to linearize the sloop of the marginal tax rate. Since none of the reform drafts of the political parties includes such a step, the IW has developed its own proposal for an income tax reform.