If the income tax rate is not continuously adjusted, an increase in income to compensate for inflation leads to a higher tax rate (progression effect: the increase in the tax rate as the size of the tax base increases) and thus to a higher tax burden, even though the income with purchasing power remains the same. In Switzerland, therefore, the legislator is bound to compensate for the cold progression; in Germany, this has not yet been achieved. – The ECB calculates the cold progression in the course of the two-pillar principle. – Cf. Monthly Report of the Deutsche Bundesbank of March 2006, p. 67 (formula), p. 74 f. (progression effect on payroll taxes).
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