What are income levels
Current quantity within the framework of household theory that flows into a household within a period. The household generally has four types of income to disposal:
(1) Income from work in the form of wage payments, in which the household offers the company usable services in the production process (work income);
(2) Income from property in the form of interest or rent through the provision of capital or land (property income);
(3) Income based on legal claims or voluntary donations (transfer income);
(4) Income as residual profit from entrepreneurial activity (entrepreneur income). For the majority of households, earned income is of decisive importance.
(5) To be added are differential incomes that result from differences in performance of factors.
Use: The household uses its net income on the one hand to invest its assets (saving) and on the other hand to purchase goods (consumption). He uses the part of the income intended for consumption optimally for the goods falling within his circle of desire, if the second Gossen law is fulfilled for him (household optimum).
See also permanent income.
1. Generally: In the context of income taxation, it is discussed which terms of income best represent the tax performance of the individual (performance principle). Public finance is based on the results of economic theory.
2. Definition (different according to the theoretical approach): a) According to the Source theory (B. Fuisting): Only the constantly flowing additions count to the income; the narrowest concept of income because of the exclusion of all aperiodic approaches to economic quantities.
b) After the Net worth access theory: In addition to the constantly flowing additions, income also includes aperiodic additions and asset increases. This corresponds to the tax principle of factual "generality" better than in a).
c) anus Schanz-Haig-Simons approach: With the Comprehensive Tax Base, this approach tries to come particularly close to the ideal of general taxation; it represents the current basis for discussion.
d) Comprehensive system of income:
(1) Monetary Income: (a) Factor remuneration: labor, capital, including profit distribution and withdrawal as well as realized capital appreciation; (b) Cash receipts from the dissolution and the addition of private assets: relinquishment, inheritance, donations, asset sales; (c) Additions from transfers: individual transfers, e.g. grants, severance payments; collective transfers, e.g. insurance benefits, public transfers such as social pensions, social assistance, child benefit.
(2) Goods income: (a) Access in kind: Deputations, official residence, training, health services in the company; (b) use of property (acquired or inherited); (c) private real transfers, e.g. housing rights, benefits from a shared household, neighborhood help; public real transfers, e.g. cures, therapeutic procedures, home accommodation.
However, this system only contains pecuniary elements, thus eliminating purely “psychological” income (satisfaction of needs); it only contains measurable access points and therefore excludes domestic services and leisure. The extent to which all access elements would also have to be subject to taxation would have to be decided separately.
Tax law of the Federal Republic of Germany
1. Income as Basis of tax liability From the point of view of fair taxation: total amount of a person's surpluses in a certain time unit (week, month, year), including income in kind.
a) Income in the sense of (so-called. Source theory): Only those net income that flow from permanent sources, i.e. regularly:
(1) solid income,
(2) unfunded income.
b) Income in the broader sense (so-called. Net worth access theory): All income, including one-off income, such as lottery winnings.
2. The German Income tax law contains parts of the source and net worth access theory. This synthetic concept of income initially followed in principle - with the exception of the use of less private capital gains (§ 23 EStG) - the term in the narrow sense, however, the historical development has then, especially recently, led to a stronger expansion of the tax income concept towards the concept of income in the broad sense, since nowadays only a few private capital gains are excluded from the tax income definition (§ 20, § 23 EStG). Income is the starting point for determining income. Only payments and losses that occur within one of the seven types of income are tax-relevant. To determine the income, certain expenses and allowances must be deducted from the total income. According to the prevailing constitutional doctrine, the income tax legislator does have a margin of discretion in structuring the tax assessment of income, but is not completely free, but has to observe certain basic rules, e.g. the objective and the subjective net principle.
See also income determination, income determination.
3. Corporation tax: What counts as income and how it is to be determined is basically determined by the provisions of the EStG, unless the KStG contains specific regulations (Section 8 I KStG). This means that in principle all types of income can arise in a corporation.
Exception: In the case of accounting obligations under the German Commercial Code, all income must be treated as income from commercial operations (Section 8 II KStG). The starting point for the determination is the tax balance sheet result, which must be corrected due to income and corporate tax regulations (income determination).
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