Spitzensteuersatz

Spitzensteuersatz, literally the top tax rate, denotes the highest marginal rate in a progressive income tax system. It is the rate that applies to the portion of a taxpayer’s income that falls into the uppermost tax bracket. The Spitzensteuersatz is not the average or effective tax rate, which depends on total income, deductions, and credits; it characterizes how the tax scales for high earners.

In Germany, the term is commonly used to refer to the upper ends of the personal income tax schedule. Germany employs a progressive structure with several brackets. In recent decades, the top marginal rates have been 42 percent for incomes above a defined threshold, and 45 percent for very high incomes above a higher threshold. The exact threshold values are set by law and are adjusted periodically for inflation and family status. Consequently, the Spitzensteuersatz can differ from year to year and between individual taxpayers.

Taxpayers also face a solidarity surcharge on the income tax and, where applicable, church tax, which increase the overall burden for high earners. The Spitzensteuersatz thus interacts with these levies to determine the final marginal burden on top income.

The concept is not unique to Germany; many countries use analogous terms for their own top marginal tax rate. In German-language discourse, Spitzensteuersatz is understood as the highest rate in the income tax schedule, possibly augmented by additional levies on high incomes when discussing the total tax burden.