It’s About Connections – How the Economic Network of the German Federal Government Affects the Top Earners’ Average Income Tax Rate

Abstract

Building on arguments to political incomes, career concerns and elitist networks, this study assumes that an increasing percentage of highly incentivized former executive board members within the German Federal Government (1957–2012) will decrease the top earners’ average income tax rate during the subsequent year. Conversely, the percentage of lower incentivized former supervisory board members is assumed to increase the top earners’ average income tax rate. Both effects are assumed to be enforced if the ruling parties have strong support in the German Bundestag. The empirical results significantly confirm the unconditional effect for former executive board members and the conditional effect for former supervisory board members.