Personal income taxes across most countries adopt a progressive tax structure, where the tax burden increases with income. This means high-income families shoulder a larger share of the tax burden, while low- and middle-income taxpayers bear a relatively smaller tax burden. The tax rate paid by individuals increases as they earn higher wages, with the highest tax rate differing significantly across European countries.
The top statutory personal income tax rate applies to the share of income that falls into the highest tax bracket. For instance, if a country has five tax brackets, and the top income tax rate of 50 percent has a threshold of €1 million, each additional euro of income over €1 million would be taxed at 50 percent.
Among European OECD countries, the average statutory top personal income tax rate is projected to be 42.8 percent in 2024. Denmark (55.9 percent), France (55.4 percent), and Austria (55 percent) have the highest top rates. On the other hand, Hungary (15 percent), Estonia (20 percent), and the Czech Republic (23 percent) have the lowest top rates.
European countries that are not part of the OECD tend to feature lower rates and tax personal income at a single rate. Bulgaria and Romania (10 percent) levy the lowest rate, followed by Moldova (12 percent), Ukraine (19.5 percent), and Georgia (20 percent).
For comparison, the average combined state and federal top income tax rate for the 50 U.S. states and the District of Columbia is 42.32 percent as of January 2024, with rates ranging from 37 percent in states without a state income tax to 50.3 percent in California.
Some countries in Europe are considering changing their top personal income tax rates in the next few years. Austria is planning to eliminate its highest tax bracket in 2026, reducing its top income tax rate from 55 percent to 50 percent. Estonia is set to increase its flat income tax rate from 20 to 22 percent in 2025.
Understanding these tax structures and rates is crucial in promoting responsible financial citizenship and making informed financial decisions. It’s important to remember that tax evasion not only leads to severe penalties but also undermines the well-being of our communities.
Stay informed and uphold your tax obligations. Remember, no one is above the law.
Source: Tax Foundation