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

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  • Viktor Steiner
  • Katharina Wrohlich

Abstract

We analyze the effects of three alternative proposals to reform the taxation of families relative to the current German system of joint taxation of couples and child allowances: a French-type family splitting and two full family splitting proposals. The empirical analysis of the effects of these proposals on the income distribution and on work incentives is based on a behavioral micro-simulation model which integrates an empirical household labor supply model into a detailed tax-benefit model based on the German Socio Economic Panel. Our simulation results show that under each reform the lion's share of the reduction in taxes would accrue to families with children in the upper part of the income distribution, and that expected labor supply effects are small for all analyzed family tax splitting reforms, both in absolute terms and relative to the implied fiscal costs.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.44578.de/dp612.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 612.

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Length: 27 p.
Date of creation: 2006
Date of revision:
Handle: RePEc:diw:diwwpp:dp612

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Keywords: Household Taxation; Income Distribution; Work Incentive; Microsimulation;

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References

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  1. 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.
  2. Matthias Wrede, 2003. "The Income Splitting Method: Is it Good for Both Marriage Partners?," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 4(2), pages 203-216, 05.
  3. 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).
  4. Paul Bernd Spahn & Helmut Kaiser & Thomas Kassella, 1992. "The tax dilemma of married women in Germany," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 13(2), pages 22-47, May.
  5. 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, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 03-32, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Apps, Patricia & Rees, Ray, 2007. "The Taxation of Couples," IZA Discussion Papers 2910, Institute for the Study of Labor (IZA).
  7. Homburg, Stefan, 2000. "Das einkommensteuerliche Ehegattensplitting," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 261-268.
  8. Creedy, J. & Duncan, A., 1999. "Welfare, Non-Linear Busget Constraints and Behavioural Microsimulation," Department of Economics - Working Papers Series, The University of Melbourne 688, The University of Melbourne.
  9. 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.
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Citations

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Cited by:
  1. Katharina Wrohlich, 2006. "Labor Supply and Child Care Choices in a Rationed Child Care Market," Discussion Papers of DIW Berlin 570, DIW Berlin, German Institute for Economic Research.
  2. Fabien Dell & Katharina Wrohlich, 2006. "Income Taxation and its Family Components in France," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 4(4), pages 50-54, 02.
  3. Peichl, Andreas & Fuest, Clemens & Bergs, Christian & Schaefer, Thilo, 2006. "Reformoptionen der Familienbesteuerung - Aufkommens-, Verteilungs- und Arbeitsangebotseffekte," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 06-8, University of Cologne, FiFo Institute for Public Economics.
  4. 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 Microsimulation Analysis," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 28(4), pages 463-495, December.
  5. Spiess, C.Katharina & Wrohlich, Katharina, 2008. "The Parental Leave Benefit Reform in Germany: Costs and Labour Market Outcomes of Moving towards the Nordic Model," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 575-591.
  6. Spiess, C. Katharina & Wrohlich, Katharina, 2006. "The Parental Leave Benefit Reform in Germany: Costs and Labour Market Outcomes of Moving towards the Scandinavian Model," IZA Discussion Papers 2372, Institute for the Study of Labor (IZA).
  7. Beninger, Denis & Bonin, Holger & Horstschräer, Julia & Mühler, Grit, 2010. "Wirkungen eines Betreuungsgeldes bei bedarfsgerechtem Ausbau frühkindlicher Kindertagesbetreuung: Eine Mikrosimulationsstudie," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 10-057, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  8. Tim Callan & A. Van Soest & John R. Walsh, 2007. "Tax Structure and Female Labour Market Participation: Evidence from Ireland," Papers, Economic and Social Research Institute (ESRI) WP208, Economic and Social Research Institute (ESRI).

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