The Distribution of Income of Self-employed, Entrepreneurs and Professions as Revealed from Micro Income Tax Statistics in Germany



Merz: The Distribution of Income of Self-employed, Entrepreneurs and Professions

16


professions, i.e. for the self-employed, the population quintiles with a lower income are
all smaller compared to those of the employees (see Figure 2).

In particular, the 90/10 ratio, which is the relation of the upper 10% to the lowest 10%
income cake, marks a strong right hand side distribution of the self-employed compared
to the employees. Nevertheless, it is remarkable that more than 40% of the employee's
net income cake is gained by the 5th quintile, the richest of 20%.

6.3 Redistributional Effects of Taxation of Employees and Self-
Employed (Entrepreneurs and Professions*)

One important aspect of any tax system is the size of its redistributional impact of
taxation. As in the case of the before tax situation we define the taxable income
situation. The after tax situation then is our net income situation. Thus, we analyze the
redistributional impacts strictly of the tax tariff (not the overall taxation) in particular,
since some parts (see the above definitions and the Appendix) of the tax system is
already taken into account to calculate the individual taxable income.

We like to measure the redistributional impacts by two approaches: first by the relative
differences of inequality measures, and, second, by an overall redistributive scheme
easily to be interpreted.

The relative differences of inequality measures of Table 4 are calculated as follows:
With all individual data inequality measures as in Table 3 are calculated for our before-
tax situation, the taxable income. Then the relative difference of the global measures
compared to the net income of Table 3 are calculated ((net-'gross')/'gross' in %). Thus,
the redistributional impacts of the fixed income tax (festgesetzte Einkommensteuer) is
our analytic concern.

The means of the self-employed are reduced by ca. 33% compared to ca. 20% of the
employees (Table 4). Relatively in the same order of magnitude both for entrepreneurs
and professions are all the further inequality measures which describes the
redistributional effects. The inequality is reduced by almost 10% for the self-employed
compared to ca. 7% for employees (Gini-coefficient). Inequality is the most reduced,
the more the situation of the lower income part is of concern (small Atkinson inequality
aversion index). The quintile relative changes show negative impacts for the 5th quintile:
with more than 6% for the self-employed compared to 2,5% of the employees, the
progressivity of the tax system becomes evident.



More intriguing information

1. The name is absent
2. The effect of classroom diversity on tolerance and participation in England, Sweden and Germany
3. SOME ISSUES IN LAND TENURE, OWNERSHIP AND CONTROL IN DISPERSED VS. CONCENTRATED AGRICULTURE
4. Restructuring of industrial economies in countries in transition: Experience of Ukraine
5. Secondary stress in Brazilian Portuguese: the interplay between production and perception studies
6. The InnoRegio-program: a new way to promote regional innovation networks - empirical results of the complementary research -
7. Sustainability of economic development and governance patterns in water management - an overview on the reorganisation of public utilities in Campania, Italy, under EU Framework Directive in the field of water policy (2000/60/CE)
8. The Shepherd Sinfonia
9. A Principal Components Approach to Cross-Section Dependence in Panels
10. The name is absent
11. Weak and strong sustainability indicators, and regional environmental resources
12. The name is absent
13. Sex differences in the structure and stability of children’s playground social networks and their overlap with friendship relations
14. Conditions for learning: partnerships for engaging secondary pupils with contemporary art.
15. Poverty transition through targeted programme: the case of Bangladesh Poultry Model
16. A methodological approach in order to support decision-makers when defining Mobility and Transportation Politics
17. The constitution and evolution of the stars
18. Dynamiques des Entreprises Agroalimentaires (EAA) du Languedoc-Roussillon : évolutions 1998-2003. Programme de recherche PSDR 2001-2006 financé par l'Inra et la Région Languedoc-Roussillon
19. The open method of co-ordination: Some remarks regarding old-age security within an enlarged European Union
20. The economic value of food labels: A lab experiment on safer infant milk formula