In many OECD countries, the middle class has seen their ability to save decline and, in some cases, has even fallen into debt, as the tax burden on Europe’s middle class becomes increasingly controversial in the current cost of living crisis.
The income and tax burden on the middle classes varies considerably across European countries. Euronews Business looked at three different scenarios based on calculations by Mathias Dolls, Florian Dorn, David Gstrein and Max Lay of the Ifo Institute in Munich. First, they looked at double-income families with two children. The 2019 data published in the article shows negative rates for Belgium, France, Greece, Estonia and Ireland, meaning that families received more social benefits that more than compensated for their tax and social security payments.
The highest effective tax burden was borne by families in Denmark and Slovenia, where the lower middle class was taxed, on average, 29 percent and 22 percent, the middle 34 percent and 30 percent, and the upper middle 37 percent and 35 percent, respectively. The case of Belgium is notable in this respect, as the tax burden varies considerably between the segments of the middle class. While families in the upper-middle class had to pay one of the highest tax rates (over 33 percent), this was less than 20 percent for the middle group and -14 percent for the lower middle class.
In the case of two-child, one-income families, the highest burden of more than 20 percent can be seen in Denmark, the Netherlands, Finland, Lithuania, Slovakia and, of course, Slovenia. Denmark, the Netherlands, and Finland had the highest tax burden in this scenario, both in the middle and upper-middle classes.
Single-person households in the European Union, on average, have to pay more tax than families in all segments of the middle class. This is not surprising on the one hand, as these households generally receive fewer social benefits than families (e.g. no child allowance), and families have more opportunities for tax relief.
In 2019, single-person households had the highest tax rates in Denmark, Belgium, Slovenia and Germany. Middle and upper middle class households in these four countries had a rate of more than 40 percent. Cyprus, Romania and Estonia had the lowest tax burden for one-person households.
Based on all of the above, it can be concluded that the middle class was the most taxed at the national level in Denmark, Belgium, Germany, Finland, Lithuania, Slovenia and the Netherlands. However, the average tax burden on the middle class in Romania, Cyprus, Bulgaria, Estonia, Portugal, Spain and Greece was lower than the EU average.
An OECD report on the pressures on the middle class found that the cost of some goods and services, such as housing, which are essential to the middle-class lifestyle, has risen faster than earnings and general inflation in recent decades. Although being middle class was once considered a guarantee of a comfortable livelihood, some indicators now suggest that this guarantee is increasingly under threat. According to a report published in 2019, the lower middle class considers the current socio-economic system to be unfair. “This can be remedied by reviewing and adjusting the tax and benefit system,” the report adds.
Ž. N.
