What are the effects of a Church Tax in Germany on Catholics? How common is income tax diversion to Catholic Churches in the world? In the USA, we usually just contribute according to our means or desires, nothing is automatic and our contributions are certainly not tied to our ability to receive the sacraments.

If an individual is registered as a Catholic in Germany, 8-9% of their income tax goes to the Church. The only way they can stop paying the tax is to make an official declaration renouncing their membership. They are no longer allowed to receive the sacraments or a Catholic burial.
https://www.ncregister.com/cna/survey-one-in-three-catholics-in-germany-thinking-of-leaving-church

Seems like this information ought to be highlighted in the Taxation in Germany wiki but it is mentioned here.
Whose idea was this and how does it square with canon law?  Is there still a collection taken at Mass in Germany?  Does it drive people away from the Church by giving them a financial incentive to leave the faith or do they find it a convenient way to give?
The question as posed gives a distorted impression of what the &quot;Kirchensteuer&quot; actually can and cannot do. This is the information from one of the largest German Tax consultancy companies (WWKN) in English:

In Germany, on the basis of tax regulations passed by the communities and within the limits set by state laws, communities may either



require the taxation authorities of the state to collect the fees from the members on the basis of income tax assessment (then, the authorities withhold a collection fee), or
choose to collect the church tax themselves.

In the first case, membership in the community is entered onto a tax document (Lohnsteuerkarte) which employees must surrender to their employers for the purpose of withholding tax on paid income. If membership in a tax-collecting religious community is entered on the document, the employer must withhold church tax prepayments from the income of the employee in addition to other tax prepayments. In connection with the final annual income tax assessment, the state revenue authorities also finally assess the church tax owed. In the case of self-employed persons or of unemployed taxpayers, state revenue authorities collect prepayments on the church tax together with prepayments on the income tax.
If, however, religious communities choose to collect church tax themselves, they may demand that the tax authorities reveal taxation data of their members to calculate the contributions and prepayments owed. In particular, some smaller communities (e.g. the Jewish Community of Berlin) choose to collect taxes themselves to save collection fees the government would charge otherwise.
The church tax is only paid by members of the respective church. People who are not members of a church tax-collecting denomination do not have to pay it. Members of a religious community under public law may formally declare their wish to leave the community to state (not religious) authorities. With such a declaration, the obligation to pay church taxes ends. Some communities refuse to administer marriages and burials of (former) members who had declared to leave it.
Taxpayers, whether Roman Catholic, Protestant or members of other tax-collecting communities, pay between 8 percent (in Bavaria and Baden-Wuerrttemberg) and 9 percent (in the rest of the country) of their income tax to the church or other community to which they belong.

So the law explicitly says churches may tax their members, it is not an obligation from the state. Therefore, whether or not it has a negative effect on church membership and how to react on this is entirely in the hands of the clergy. This being said, the majority of churches in all regions of Germany tax their members. About 70% of church revenues come from church tax (Kirchensteuer) in Germany. This was about 9.2 billion euro in 2010.
These religious communities collect a church tax in Germany:

The Evangelical Church (Evangelische Kirche)
The Roman Catholic Church (Römisch-katholische Kirche)
The Jewish Community (Jüdische Gemeinde)
The Old Catholic Church (Altkatholische Kirche)
Various Free Religious communities (Freireligiöse Gemeinden)

As to the origins: giving a share of one’s income to the church has been a part of European tradition for centuries. Today, several countries continue to collect a “church tax” on behalf of officially recognized religious organizations, in some cases levying the tax on all registered members.1 These payments add up to billions of euros annually and represent the biggest source of revenue for many religious institutions.
Contrary to @Zippy2006's comment: in 2012, the Catholic church officially announced they will refuse sacraments and rituals for those that leave the church, which is the only way to stop paying the Kirchensteuer. Archbishop Robert Zollitsch, the president of the German bishops' conference, said that not paying taxes for the church is a grave offense, and that sacraments will be banned for those who distance themselves from the church. Many Germans have considered this decree a threat of excommunication.
According to Pew Research, growing numbers of people have been opting out of the tax by formally deregistering from their churches, perhaps another sign of secularization in the region. Some European advocates for greater distance between church and state argue that church tax systems violate freedom of religion and have called for their abolition. The Church tax law is under scrutiny from the EU for this reason, as it allows for the taxation of immigrants who were baptized in their country of origin but register as atheist in Germany.
Germany is not the only country in Europe that has a Church Tax law. It's also not the country with the highest rates of people stopping to pay the tax:

The church tax is however not the main driver behind the fall in European religiosity, as this graph from Pew research indicates, comparing religiosity and attendance in European countries with and without a state church tax: