17.2 The effect of cold progression without tariff adjustment

In the graph below you can see how the cold progression would take effect if the tax rates were not adjusted. You compare the tax rate of an initial year (pink) with the tax rate that would result if this rate were adjusted with the inflation rate (red). Both the marginal tax rates (thin) and the average tax burden (thick) are displayed.

This comparison shows by how much the tax burden would be reduced for the same nominal income. The income regulator gives you the possibility to display the comparison in Euro and in percent. This information is exactly equivalent to the additional tax burden that would result if income increases with the inflation rate (i.e. real income remains constant) and the tax rate would not change. It thus indicates the unadjusted burden of the cold progression.

The longer the period, the stronger the effect is noticeable. Over the years, the additional burden would be some thousand Euro.

Tariffs between 1958 and 2016 can be selected. The initial year must be before the end year.

Ausgangsjahr Endjahr


(c) by Christian Bauer
Prof. Dr. Christian Bauer
Chair of monetary economics
Trier University
D-54296 Trier
Tel.: +49 (0)651/201-2743
E-mail: Bauer@uni-trier.de
URL: https://www.cbauer.de