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Minimum Income and Flat Tax Revisited: A Combined CGE‐Microsimulation Analysis for Germany

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  • Stefanie Schubert

Abstract

Objective This article quantifies the economic effects of a fundamental reform proposal for Germany's social security system that integrates most parts of the prevailing social security insurances into the general tax‐transfer system. Methods Drawing on individual household data, we use a combined approach that employs both computable general equilibrium modeling and microsimulations. Results By discussing two revenue‐neutral reform scenarios that both encompass a negative income tax for low incomes and a flat tax rate otherwise, but differ in the effective marginal tax rates and tax allowances, we find a negligible or even negative impact on employment and GDP. Conclusion Our results cast doubt on whether such a fundamental reform would have positive welfare effects.

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  • Stefanie Schubert, 2018. "Minimum Income and Flat Tax Revisited: A Combined CGE‐Microsimulation Analysis for Germany," Social Science Quarterly, Southwestern Social Science Association, vol. 99(5), pages 1750-1764, November.
    • Handle: RePEc:bla:socsci:v:99:y:2018:i:5:p:1750-1764
    DOI: 10.1111/ssqu.12532
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    Cited by:

    1. Donald R. Richards & Thomas L Steiger, 2021. "Value orientations and support for guaranteed income," Social Science Quarterly, Southwestern Social Science Association, vol. 102(6), pages 2733-2751, November.
    2. P. Campoy-Muñoz & M. A. Cardenete & F. J. De Miguel-Vélez & J. Pérez-Mayo, 2022. "How does fiscal austerity impact on poverty and inequality? The Spanish case," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 39(3), pages 715-737, October.
    3. Cieplinski, André & D'Alessandro, Simone & Dwarkasing, Chandni & Guarnieri, Pietro, 2023. "Narrowing women’s time and income gaps: An assessment of the synergies between working time reduction and universal income schemes," World Development, Elsevier, vol. 167(C).

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