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One issue is the way taxes work in Germany that disincentives entering the middle rungs of a career ladder. Like if you’re a software engineer and want to becom

by harryf 3y ago

One issue is the way taxes work in Germany that disincentives entering the middle rungs of a career ladder. Like if you’re a software engineer and want to become an engineering manager, you might end up earning less after tax as a manager than you did as an engineer as your salary increase puts you in a new tax bracket. Otherwise Germanys economy is optimized to support medium to large German companies with export businesses. Little attention has been given to support new business ventures, so for young people becoming an entrepreneur makes little sense when you can earn more and have less stress with a normal job. full disclosure: this is based on personal experience and observation as a Brit that worked in Germany for a while and ended up in Switzerland

mrks_hy 3y ago
> you might end up earning less after tax as a manager than you did as an engineer as your salary increase puts you in a new tax bracket. This is impossible, even with the very high German taxes :-) You will keep less of each (EDIT: additional) Euro you earn, but the tax progression is not that broken that getting paid more results in less money for you. There are diminishing returns on hours worked, if that is what you meant, but otherwise it's untrue.
pi-e-sigma 3y ago
< you might end up earning less after tax as a manager than you did as an engineer as your salary increase puts you in a new tax bracket That's not how progressive taxation and the tax brackets work. In reality you pay higher tax rate only on the amount above the threshold. So if, say, the tax rate is 20% on the income up to $10000 and 30% above it then if you earn $30000 you pay 20% on the $10000 and 30% only on the remaining $20000. You don't pay 30% on the whole $30000. Why is this misconception is so common?
FlyingSnake 3y ago
This is not true. For example A Software Engineer can earn 90K while an Engineering Manager can earn 85K at a different company.

by harryf 3y ago

mrks_hy 3y ago

> you might end up earning less after tax as a manager than you did as an engineer as your salary increase puts you in a new tax bracket. This is impossible, even with the very high German taxes :-) You will keep less of each (EDIT: additional) Euro you earn, but the tax progression is not that broken that getting paid more results in less money for you. There are diminishing returns on hours worked, if that is what you meant, but otherwise it's untrue.

pi-e-sigma 3y ago

< you might end up earning less after tax as a manager than you did as an engineer as your salary increase puts you in a new tax bracket That's not how progressive taxation and the tax brackets work. In reality you pay higher tax rate only on the amount above the threshold. So if, say, the tax rate is 20% on the income up to $10000 and 30% above it then if you earn $30000 you pay 20% on the $10000 and 30% only on the remaining $20000. You don't pay 30% on the whole $30000. Why is this misconception is so common?

FlyingSnake 3y ago

This is not true. For example A Software Engineer can earn 90K while an Engineering Manager can earn 85K at a different company.