The Ifo study on the empirical development of the so-called “child penalty tax” examines this phenomenon in the Federal Republic of Germany for the period 1990–2002, quantifying the financial burden for families with children compared to people without children.
After a presentation of the general tax regulations and a calculation of child costs, the quantification is carried out on the basis of pre-determined household types. Child-related consumer taxes were used in the study in the areas of electricity, fuels, petrol as well as with regard to the value-added tax.
The results of the quantification reveal that in terms of taxation, families with children were indeed at a disadvantage between 1990 and 2002 compared to people without children. Families with children had to pay a child-penalty tax of ca. €33 billion. This amount can be characterised as the injustified tax revenue burdening the tax-free subsistence level of children.
The study clearly shows that families with children were disadvantaged in the past in comparison to people without children since the necessary expenditures for children were not sufficiently taken into consideration in the taxation system. With the introduction of an allowable deduction for child care, education and training, this disadvantage has been eliminated, at least from a taxation viewpoint. Nonetheless, in future other family promotion measures could be considered, in particular external or in-house child card that would give both parents complete discretion in the choice of employment.
"Steuerlich induzierte Kinderlasten: Empirische Entwicklung in Deutschland", ifo Forschungsbericht No. 19, Munich, 2003.
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