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Introducing Family Tax Splitting in Germany: How Would It Affect the Income Distribution, Work Incentives, and Household Welfare?

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  • Viktor Steiner
  • Katharina Wrohlich

Abstract

We analyze the effects of three different proposals to introduce a family tax-splitting system in Germany. The empirical analysis is based on a behavioral microsimulation model, which integrates an empirical household labor-supply model into a detailed tax-benefit model. Our results show that, under each reform, the lion's share of the reduction in taxes would accrue to families in the upper part of the income distribution, and that labor-supply effects are small. If budgetary balance were financed by a reduction of the child benefit, our results suggest that none of the reforms would be welfare-improving.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 64 (2008)
Issue (Month): 1 (March)
Pages: 115-142

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200803)64:1_115:iftsig_2.0.tx_2-w

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Keywords: Household taxation; income distribution; work incentives; microsimulation;

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References

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  1. Paul Bernd Spahn & Helmut Kaiser & Thomas Kassella, 1992. "The tax dilemma of married women in Germany," Fiscal Studies, Institute for Fiscal Studies, vol. 13(2), pages 22-47, May.
  2. Patricia Apps & Ray Rees, 2007. "The Taxation of Couples," Discussion Papers 07/21, Department of Economics, University of York.
  3. Helene Dearing & Helmut Hofer & Christine Lietz & Rudolf Winter-Ebmer & Katharina Wrohlich, 2007. "Why are mothers working longer hours in Austria than in Germany? A comparative micro simulation analysis," Economics working papers 2007-11, Department of Economics, Johannes Kepler University Linz, Austria.
  4. Laisney, François & Beninger, Denis & Beblo, Miriam, 2003. "Family Tax Splitting: A Microsimulation of its Potential Labour Supply and Intra-household Welfare Effects in Germany," ZEW Discussion Papers 03-32, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  5. Matthias Wrede, 2003. "The Income Splitting Method: Is it Good for Both Marriage Partners?," German Economic Review, Verein für Socialpolitik, vol. 4(2), pages 203-216, 05.
  6. Peter Haan & Viktor Steiner, 2005. "Distributional Effects of the German Tax Reform 2000 - A Behavioral Microsimulation Analysis," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 125(1), pages 39-49.
  7. Baclet, Alexandre & Dell, Fabien & Wrohlich, Katharina, 2005. "Income Taxation and Household Size: Would French Family Splitting Make German Families Better Off?," IZA Discussion Papers 1894, Institute for the Study of Labor (IZA).
  8. Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
  9. Viktor Steiner & Peter Haan & Katharina Wrohlich, 2005. "Dokumentation des Steuer-Transfer-Mikrosimulationsmodells STSM 1999 - 2002," Data Documentation 9, DIW Berlin, German Institute for Economic Research.
  10. Viktor Steiner & Katharina Wrohlich, 2004. "Household Taxation, Income Splitting and Labor Supply Incentives: A Microsimulation Study for Germany," Discussion Papers of DIW Berlin 421, DIW Berlin, German Institute for Economic Research.
  11. Bergs, Christian & Fuest, Clemens & Peichl, Andreas & Schaefer, Thilo, 2006. "Das Familienrealsplitting als Reformoption der Familienbesteuerung," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1998 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 86(10), pages 639-644.
  12. Creedy, J. & Duncan, A., 1999. "Welfare, Non-Linear Busget Constraints and Behavioural Microsimulation," Department of Economics - Working Papers Series 688, The University of Melbourne.
  13. Maiterth, Ralf, 2005. "Familienpolitik und deutsches Einkommensteuerrecht: empirische Ergebnisse und familienpolitische Schlussfolgerungen," arqus Discussion Papers in Quantitative Tax Research 7, arqus - Arbeitskreis Quantitative Steuerlehre.
  14. Homburg, Stefan, 2000. "Das einkommensteuerliche Ehegattensplitting," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 261-268.
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Citations

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Cited by:
  1. Gruber, Magdalena & Höhenberger, Nicole & Höserle, Silke & Niemann, Rainer, 2009. "Familienbesteuerung in Österreich und Deutschland: Eine vergleichende Analyse unter Berücksichtigung aktueller Steuerreformen," arqus Discussion Papers in Quantitative Tax Research 82, arqus - Arbeitskreis Quantitative Steuerlehre.
  2. Selin, Håkan, 2009. "The Rise in Female Employment and the Role of Tax Incentives. An Empirical Analysis of the Swedish Individual Tax Reform of 1971," Working Paper Series 2009:4, Uppsala University, Department of Economics.
  3. Haan, Peter & Wrohlich, Katharina, 2007. "Optimal Taxation: The Design of Child Related Cash- and In-Kind-Benefits," IZA Discussion Papers 3128, Institute for the Study of Labor (IZA).
  4. Bach, Stefan & Corneo, Giacomo & Steiner, Viktor, 2012. "Optimal top marginal tax rates under income splitting for couples," European Economic Review, Elsevier, vol. 56(6), pages 1055-1069.
  5. Meier, Volker & Wrede, Matthias, 2013. "Reducing the excess burden of subsidizing the stork: Joint taxation, individual taxation, and family tax splitting," Munich Reprints in Economics 19213, University of Munich, Department of Economics.
  6. Kurowska, Anna & Myck, Michal & Wrohlich, Katharina, 2012. "Family and Labor Market Choices: Requirements to Guide Effective Evidence-Based Policy," IZA Discussion Papers 6846, Institute for the Study of Labor (IZA).
  7. Stefan Bach & Peter Haan & Richard Ochmann, 2013. "Taxation of Married Couples in Germany and the UK: One-Earner Couples Make the Difference," International Journal of Microsimulation, Interational Microsimulation Association, vol. 6(3), pages 3-24.
  8. Hans Fehr & Manuel Kallweit & Fabian Kindermann, 2013. "Reforming Family Taxation in Germany: Labor Supply vs. Insurance Effects," SOEPpapers on Multidisciplinary Panel Data Research 613, DIW Berlin, The German Socio-Economic Panel (SOEP).
  9. Vanessa Mühlböck, 2009. "Geschlechtergerechtigkeit des Einkommensteuersystems: Mythos oder Wahrheit?," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 35(1), pages 45-64.

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