Rising Pension Taxation in Saxony, Saxony-Anhalt, and Thuringia
Pension taxes are on the rise - Rising Burden on Retirement Income
A growing concern for pensioners in the German states of Saxony, Saxony-Anhalt, and Thuringia is the increasing taxation of pensions. According to data from the Federal Statistical Office, these regions have some of the highest rates of taxed pensions in the country.
In Saxony, the rate of taxed pensions stands at 72.8 percent, making it the third-highest among all German states. Meanwhile, in Thuringia, the second-highest rate of taxed pensions is reported at 73.0 percent. Remarkably, Saxony-Anhalt holds the highest rate of taxed pensions in the country, with an astonishing 73.2 percent.
These figures were obtained by the Alliance for Progress (BSW). Sahra Wagenknecht, a prominent German politician, has been vocal about this issue, making statements in Magdeburg, Erfurt, and Dresden to address the rising taxes and social security contributions for pensioners in these states.
Wagenknecht has proposed that all pensions up to 2,000 euros should be tax-free, arguing that pensions must no longer be 'destroyed' by taxes. She believes that this move would provide much-needed relief to pensioners in these regions, who are grappling with the burden of increasing taxation.
The Evolution of Pension Taxation in Germany
The progression of pension taxability in Germany has been a gradual process. Until 2005, pension income was largely exempt from income tax. However, starting from December 2005, half of the total pension amount became taxable. Since then, the taxable portion has increased by 1% each year. By 2022, 82% of pension income was taxable, and pensions will be fully taxable by 2040.
The income tax rates in Germany are progressive, meaning they increase with income level. For 2025, the progressive rates start at 14% and increase to 42% for middle incomes, with a top rate of 45% for very high incomes. There is no specific differentiation in tax rates between states like Saxony-Anhalt, Saxony, and Thuringia, as the tax system is federally managed.
Additionally, there is a solidarity surcharge (Soli) of 5.5% applied to high-income earners (including those with higher pensions) on top of their income tax. This surcharge was introduced to help cover the costs of reunification and is generally phased out for lower- and middle-income earners.
While there may be differences in the solidarity surcharge applicability and regional subsidies or state-specific tax policies, these do not affect the primary income tax rates on pensions. All states use the same progressive income tax system, and the tax rates are uniform across the country.
In conclusion, the increasing taxation of pensions in these regions is primarily due to changes in how pension income is taxed over time, rather than any specific state-level tax policies. As the issue continues to garner attention, it remains to be seen how Germany will address the concerns of its pensioners in Saxony, Saxony-Anhalt, and Thuringia.
- The Alliance for Progress (BSW) is advocating for a change in the taxation system to make all pensions up to 2,000 euros tax-free in the face of growing concern among pensioners in Saxony, Saxony-Anhalt, and Thuringia, arguing that this move could provide relief to pensioners grappling with the burden of increasing taxation, given the evolving pension taxation in Germany over the years.
- Despite the gradual progression of pension taxability in Germany since 2005, with pension income becoming increasingly taxable each year, the tax system in Germany remains uniform across all states, with no specific differentiation in tax rates between Saxony-Anhalt, Saxony, and Thuringia. However, the rising taxation of pensions has become a significant concern in these regions, leading to calls for change in the taxation system by politicians like Sahra Wagenknecht.
