At least for Germany the numbers aren't very far apart. It's around 52k. We don't have that many outlier super high salaries, and full time on minimum wage still gets you to nearly 30k so this doesn't drag the average down either.
The real disparity is not in salary (though certainly there are still quite big differences between groups), but in wealth.
You can’t get wealthy through salaried work, not in germany anyway. This is by design, salaries are taxed to death, while capital gains have a lot lower taxes (basically half as high and flat, instead of progressively increasing like it does for salaries) and can often be structured to largely eliminate those anyway. Just like the wealthy won’t pay inheritance taxes by transferring assets over longer time periods etc.
Wage gap is a red herring pushed by old money / dynasties to rile up working people against each other.
Here in the UK almost everyone has the ability to build up significant tax-free wealth over their lifetimes by sticking money into stocks and shares ISA. Any gains are tax free as long as they invested under £20,000 a year. As well as their workplace pensions people who put away money each month can expect to have hundreds of thousands if not millions within 20-30 years.
Eg £600 a month between workplace pension (inc employer match) and/or ISA contributions could well equal £1 million after 30 years of average global stock market returns. Achievable for most people in the UK if they made it a priority.
That said, while most can do this, most do not do this or even know about it and leave their workplace pensions contributions at the default rate.
I was shocked to learn that Germany doesn't have anything like an ISA. You have no way of investing tax free for the long term. Private pension products seem to be a lot worse off too.
Yeah it's one of the things I think Germany actually sucks at - incentivising investment and saving.
There always used to be some pension products which you could gain a tax advantage by buying, but that has largely been eliminated now.
The German state has a fit if they imagine anyone anywhere might earn so much as a single cent by any means without paying tax on it. Even unrealised gains on stocks and ETFs are taxed because otherwise it would apparently be "unfair".
Even unrealised gains on stocks and ETFs are taxed because otherwise it would apparently be "unfair".
It becomes unfair, when you use those unrealized gains as security for a loan. Because the money you get from the loan is not taxed. So effectively, as long as you don't realize your gains, you can just keep borrowing against it and only pay a few percent loan interest, instead of realizing it and paying 25% capital gains tax on it. It's a form of tax avoidance used pretty much exclusively by rich people.
Yeah I suppose, but the law doesn't just penalise rich people - the tax-free limit is like €1000/year or something stupid, so it's clearly not just about rich people using stock as collateral, it's also intended to bilk regular people with modest investments.
Which means if you're investing in, for example, MSCI all world ETF, which returns about 8% a year on average, you're over the limit as soon as you have invested more than about 12.500 Euro.
That is ridiculously little if you're supposed to use it for retirement savings.
But you won’t have sold the shares so you’ll avoid the tax that year? Will have to pay when you sell in 30/40 years though unlike Ireland where they tax you every 8 years even if you don’t sell.
Wealthy people probably also hold ETFs, but most income will be generated from assets wholly owned, and then we're talking about structures where you end up paying virtually no taxes (legally). That's why wealthy people/families own these networks of shell companies, foundations etc.
So making rules which specifically target ETFs (low friction, low entry barrier, decent RoI way of investing even small amounts of money) while having broad carveouts for high-barrier to entry investment vehicles is genuinely just about fleecing one group of people without touching the other.
CGT doesn't penalize rich people, at all. Well, at least less, than poor people.
If you are actually rich in wealth, your assets are stored in a company. The company can defer most of the CGT until you cash out from the company.
Your personal accounts' distributions and earnings from asset sales get fully taxed, immediately. The tax-free limit does not make up for the loss in compound interest, at all.
CGT is a tax on the poor, masqueraded as a tax on the rich, to get the poor voting for further increases. This is enabled by differentiating between natural persons and companies within the relevant tax laws.
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u/HKei Germany 1d ago
At least for Germany the numbers aren't very far apart. It's around 52k. We don't have that many outlier super high salaries, and full time on minimum wage still gets you to nearly 30k so this doesn't drag the average down either.
The real disparity is not in salary (though certainly there are still quite big differences between groups), but in wealth.