Flat out unfair? A progressive take on taxes

Hi, this is Luc, working in the visualization team. If you like visualizing data and, like me, often procrastinate to do your taxes, I present you here my best tax filing avoidance achievement: visualizing data about taxes!

When paying income taxes, the rate of taxation often depends on your life circumstances. A common rule is that taxes take a progressively higher percentage out of higher incomes, what's known as a progressive tax rate. In other words, the more you earn, the more of it you pay in.

The charts above represent the tax rate for a single person without children at various income levels, measured as a percentage of each country’s average income. Columns on the left represent lower-income households, while columns on the right have higher income. The steeper the gradient between them, the more progressive that country's tax system is.

How progressive are European income tax rates?

Tax rates in Europe are on average rather progressive, but the situation varies a lot between countries.

• For Belgium, the difference between the highest and lowest rate is almost 30 percentage points, which makes its system the most progressive in Europe. Most western European countries likewise have a fairly progressive range of at least 20 percentage points. Spain has Europe's lowest tax rate for the poorest households (6.5%), 21.9 percentage points less than its highest tax rate.

• Countries with a less progressive tax rate than the EU27 average are a diverse group. Germany, Slovenia, or Denmark, all still fairly progressive, have higher-than-average taxes for both their poorest and richest residents.

• Other countries, notoriously Switzerland, combine a less progressive gradient with low tax rates for all income groups. This is rather to the advantage of the wealthiest residents, who pay just 22.8% of their income, only 10 percentage points more than the lowest earners.

• The most surprising fact to me was to discover that many eastern European countries have a barely progressive tax rate, below 10 percentage points, or even a totally flat rate like Hungary, where tax is 33.5% for all income groups.

Whether progressive taxation disturbs the free market, as conservative economists argue, or distributes the fruits of labor more equally and creates a more harmonious society with positive effects on the economy in the long run, is a contentious issue in the political realm. Income tax rates also don’t capture the whole tax situation: The data above doesn’t account for tax exemptions and relates only to income, not investments, which is how the wealthiest persons actually make most of their money.

I hope you enjoyed this tour d'horizon of the tax situation in Europe. We'll be back next Thursday with another Weekly Chart.