Tax Relief for Families in Europe

Many countries provide targeted taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. relief for families with children, typically through targeted tax breaks that lower income taxes. As today’s map shows, the extent to which such tax relief is granted varies substantially across European countries.

One way to measure targeted tax relief for families is to compare the tax burdens on labor of a family with one earner and two children and a single worker without children, both earning the same pretax income.

The tax burden on labor, or “tax wedgeA tax wedge is the difference between total labor costs to the employer and the corresponding net take-home pay of the employee. It is also an economic term that refers to the economic inefficiency resulting from taxes. ,” is defined as the difference between an employer’s total labor cost of an employee and the employee’s net disposable income. In other words, it is the sum of income taxes and payroll taxA payroll tax is a tax paid on the wages and salaries of employees to finance social insurance programs like Social Security, Medicare, and unemployment insurance. Payroll taxes are social insurance taxes that comprise 24.8 percent of combined federal, state, and local government revenue, the second largest source of that combined tax revenue. es of a worker earning the average wage in a country, divided by the total labor cost of this worker.

In the European countries covered, a family with one earner and two children faced on average a tax burden of 29.9 percent in 2018. The average tax burden a single worker without children faced was 40.2 percent, 10.3 percentage-points higher than a family.

Luxembourg had the largest disparity between the two tax wedges of all countries covered, with a 21.2 percentage-point difference between its 38.2 percent wedge for single workers and 17 percent wedge for families.

Turkey had the smallest gap with tax burdens of 37.2 percent on families and 38.9 percent on singles, a difference of only 1.7 percentage-points.

Table 1. Tax Burden on Labor of Families and Single Workers, 2018

Source: OECD, “Taxing Wages,” https://stats.oecd.org/Index.aspx?DataSetCode=AWCOMP.
	Single person earning a nation’s average wage, no child	One-earner married couple earning a nation’s average wage, 2 children	Percentage-Point Difference
Austria	47.6%	37.4%	10.2
Belgium	52.7%	37.3%	15.4
Czech Republic	43.7%	25.5%	18.2
Denmark	35.7%	25.2%	10.5
Estonia	36.5%	26.6%	9.9
Finland	42.3%	37.8%	4.5
France	47.6%	39.4%	8.2
Germany	49.5%	34.4%	15.1
Greece	40.9%	37.9%	3.0
Hungary	45.0%	30.3%	14.7
Iceland	33.2%	21.5%	11.7
Ireland	32.7%	17.3%	15.4
Italy	47.9%	39.1%	8.8
Latvia	42.3%	32.3%	10.0
Lithuania	40.6%	33.2%	7.4
Luxembourg	38.2%	17.0%	21.2
Netherlands	37.7%	32.6%	5.1
Norway	35.8%	32.4%	3.4
Poland	35.8%	20.9%	14.9
Portugal	40.7%	29.0%	11.7
Slovak Republic	41.7%	30.3%	11.4
Slovenia	43.3%	25.2%	18.1
Spain	39.4%	33.9%	5.5
Sweden	43.1%	37.9%	5.2
Switzerland	22.2%	9.8%	12.4
Turkey	38.9%	37.2%	1.7
United Kingdom	30.9%	26.2%	4.7
Average	40.2%	29.9%	10.3

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