In 2025, according to current figures from the Federal Statistical Office (Destatis), the German state spent around 2,263 billion euros. This stood against nominal gross domestic product of around 4,470 billion euros. In purely arithmetic terms, just over 50.6% of annual economic output therefore ran through government budgets and social security funds. The German state is therefore quite bloated and has mutated into a huge redistribution, employment and provision circuit. The number game bluntly exposes the actual problem and is much easier to present than the moral classification into hardworking and less hardworking citizens. Anyone who wants to understand why good gross income often produces surprisingly little wealth has to start exactly there.
Germany likes to talk about taxpayers. Almost everyone pays taxes somewhere. VAT is due when shopping, additional levies apply to energy, and even pensioners pay consumption taxes, civil servants income tax, politicians as well. At first, this looks like a broad distribution of burdens, but from an economic perspective the subject is more complex. What matters is not only who pays taxes. What matters is who finances the state on a net basis from privately generated value creation. And precisely this group has steadily become smaller in recent years. This is referred to as the net taxpayer.
The state does not just collect taxes, it consumes economic output
The national accounts from Destatis show government revenue of around 2,139 billion euros and government expenditure of around 2,263 billion euros for 2025. The deficit was therefore around 124 billion euros, or 2.8% of nominal gross domestic product. The scale alone changes the view, because Germany does not have a small state that only occasionally intervenes in the economy. Germany has a state that moves more than half of one year’s economic output through expenditure.
This includes, among other things, pensions, civil servant pensions, health care, long-term care, administration, education, defense, interest, subsidies, transfers and public investment. That is not necessarily wrong, because a modern country also needs infrastructure, security, courts, schools, administration and social protection in order to keep growing or at least maintain its economic strength. However, all these services do not fall from the sky. They are paid for from current value creation. If expenditure rises faster than the private base that has to carry it, state stability inevitably turns into a shifting of burdens.
Debt does not change that; it merely pushes the problem further into the future. A deficit of around 124 billion euros simply reappears later through interest, higher taxes, higher contributions, inflation or reduced room for future budgets. And that is precisely why it is not enough to look only at wage and income tax. The state reaches in at several points: income, social security contributions, consumption, energy, companies and future debt. Even one’s own retirement provision in the form of capital income.
For the individual employee, what matters in the end is not what the levy is called, and perhaps not even what it is actually being paid for. What matters is how much of one’s own work can later be converted into ownership as freely disposable income.
A taxpayer is not the same as a net taxpayer
The term net taxpayer sounds harsh, but at first it is only a calculation category. It refers to people or households that pay more in taxes and contributions than they receive back directly through transfers, state cash benefits or individually attributable services. This can never be measured completely cleanly down to the euro. Roads, police, courts, schools or administration are used by many people at the same time. Nevertheless, the basic question remains justified: Who carries the state on balance, and who is primarily financed from it?
For civil servants, politicians and employees in the public sector, this distinction becomes especially tricky. They formally pay taxes. A teacher, a police officer, a caseworker at the tax office or a member of the Bundestag has taxable income. On the tax assessment, this looks like other income too. Economically, however, it is not the same. The income first comes from public budgets. The state therefore first pays a gross salary and then receives part of it back as tax. This tax payment reduces the net costs of the public sector, but it does not create an additional inflow from private value creation.
This is not meant to devalue this work. On the contrary: Without teachers, police, the judiciary, administration and defense, no free economy works. But for the financing calculation, the difference matters. A private company has to find customers, sell products, win orders, bear risks and generate wages, profits and taxes from this process. The public sector is paid from the budget that others first have to fill.
The number of employed people obscures the carrying burden
In 2025, Germany had an annual average of around 45.98 million employed people. At first, that sounds like a solid base, but with a total population of around 83.5 million people, only about every second resident is working. As of June 30, 2025, around 5.38 million people worked in the public sector. If these 5.38 million are subtracted from the 2025 employment figure, the result is roughly 40.6 million employed people outside the direct public sector. That is less than 49% of the population, and even this figure is still generously calculated, because it also includes part-time employees, mini-jobs, low earners, self-employed people with fluctuating income, households receiving top-up benefits and sectors that depend heavily on state financing. Health care, long-term care, educational providers, the social economy, subsidies, public contracts and regulated sectors cannot be determined cleanly.
The actual private financing base is therefore not all residents, not all taxpayers and not even all employed people. It consists of the people and companies whose income arises outside the state and who put more into the state circuit on a net basis than they directly get back out of it.
The tax wedge shows the burden better than wage tax
Many debates about burden overlook exactly this because they focus only on income tax. The actual burden on work becomes visible only when employer costs, employee contributions, income tax and social security contributions are considered together. The OECD calls this measure the tax wedge. It measures the gap between what an employer pays for work and what reaches the employee after taxes and social security contributions. For an average single earner, this tax wedge in Germany was 49.3% in 2025. Only Belgium was higher in the OECD comparison.
So when work costs the employer 100 euros, only just over half lands as net income in the account of an average single employee in Germany. The rest flows to the state and the social insurance systems through taxes and social security contributions. For building wealth, that is exactly the problem. Gross income is not decisive, but the part that remains after deductions, housing, energy, mobility, family and consumption. Anyone who wants to build wealth from work in Germany starts with a heavy burden.
This also explains why many people with good incomes do not feel rich and often are not rich at all, because they are already counted in this class with 50% more than the average. They are not transfer recipients, but they are not wealthy either. They carry high ongoing burdens and build ownership only slowly. On paper, they belong at most to the strong middle.
The welfare state needs payers
A welfare state needs solidarity. No one has to pretend that pensions, long-term care, health insurance or support in emergencies are unnecessary. The problem is not that a country protects the weaker. The problem begins when the state places an ever heavier burden on the supporting group while allowing so little ownership formation that this group itself remains dependent.
The social insurance systems are largely financed from current income and essentially redistributed only between generations. The statutory pension depends on contributions from the employed and on federal subsidies. Health care and long-term care become more expensive because the population is aging and medical services cost more.
When the number of employed people stagnates, the population ages and the public sector grows, financing becomes increasingly difficult. Then the same private base has to carry more. Either through higher contributions, higher taxes, higher debt or a mixture of everything. This always affects one’s own ability to save. Every additional contribution-rate point, every instance of bracket creep, every higher consumption tax and every indirect levy reduces the amount that can flow each month into reserves, stocks, real estate, business interests or other assets, so that people are less dependent on the state and therefore society in old age.
The public sector is necessary, but not the financing source
Germany needs a functioning state. Anyone who cuts internal security, courts, schools, tax administration or defense to the bone also destroys the foundation of private value creation. Nevertheless, the calculation has to add up. The public sector is not an external financier of the state, but part of the state circuit. It can be necessary, productive and socially important, but it does not replace a private value-creation base.
Destatis shows for the public sector an increase from 4.65 million to 5.38 million employees between 2014 and 2024. That is an increase of 15.6%. The number of salaried employees in the public sector rose particularly strongly. This too may have factual reasons, but every additional state-financed employment relationship has to be carried by a base that itself cannot grow without limit. If industry, construction, small and medium-sized businesses and self-employment weaken while state-related areas grow, the burden shifts. Then the state becomes larger without the private financing base becoming stronger at the same pace.
A country can afford a lot of state if its private economy is strong enough. If that strength weakens, a large state does not become a protective shield, but a cost block.
Conclusion
Anyone who wants to build wealth in Germany must accept that current earned income is heavily burdened. A good gross salary is not enough. Wealth arises only when the remaining net income regularly becomes ownership. This step has to be organized before everyday life consumes the rest. That sounds harsh, but it is the sober lesson from the figures. An employee cannot lower the government spending ratio alone. They also cannot change demographics. But they can understand that the state is likely to need more money in the future rather than less.
Anyone who relies completely on the state is tied to exactly the system whose financing base is becoming smaller. Germany does not have a poor state. A welfare state needs people who finance it. If this group becomes too small, the burdens rise for those who still carry them. Then solidarity gradually turns into excessive strain…
