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Professions, entrepreneurs, employees and the new German tax (cut) reform 2000 - A MICSIM microsimulation analysis of distributional impacts

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  • Joachim, Merz
  • Henning, Stolz
  • Markus, Zwick

Abstract

With the tax reform 2000 Germany has seen the implementation of the most ambitious tax reduction programme in its post-war history. In the period from 1998 to 2005, taxpayers will benefit substantially from net tax relief more than DM 100 billions in total. It is expected, that private consumption and investment are stimulated - two essential requirements for promoting growth and employment. Under the aspect of the tax reform 2000 and the ‘Karlsruher Entwurf’ (an expert draft on further income tax reform approaches) compared to the former taxbase system we investigate in our paper overall and distributional and redistributional impacts on the self employed (professions (free lancers) and entrepreneurs) and employees besides other socioeconomic grouping like gender and family type. In addition, a decomposition analysis based on a generalized entropy approach quantifies the socioeconomic subgroups’ inequality contribution to overall inequality. Together with the recent poverty and wealth report for our government, this is the first time that the anonymized microdata records of the German Income Tax Statistic can be used by researchers within the Federal Statistical Office. Such a microdata file is essential for analysing above all the often neglected situation of the self-employed; in traditional surveys, where, in principle, firm information yielding the final income and taxes to be paid are not available for the self-employed.

Suggested Citation

  • Joachim, Merz & Henning, Stolz & Markus, Zwick, 2002. "Professions, entrepreneurs, employees and the new German tax (cut) reform 2000 - A MICSIM microsimulation analysis of distributional impacts," MPRA Paper 6345, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:6345
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    References listed on IDEAS

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    1. Canto, Victor A. & Joines, Douglas H. & Laffer, Arthur B., 1983. "Foundations of Supply-Side Economics," Elsevier Monographs, Elsevier, edition 1, number 9780121588205.
    2. Gerhard Wagenhals, 2001. "Incentive and Redistribution Effects of the "Karlsruher Entwurf zur Reform des Einkommenssteuergesetzes"," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 194/2001, Department of Economics, University of Hohenheim, Germany.
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    8. Stefan Bach & Bernd Bartholmai, 2000. "Möglichkeiten zur Modellierung hoher Einkommen auf Grundlage der Einkommensteuerstatistik," Discussion Papers of DIW Berlin 212, DIW Berlin, German Institute for Economic Research.
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    Cited by:

    1. Merz, Joachim, 1993. "Market and Non-market Labor Supply and Recent German Tax Reform Impacts - Behavioral Response in a Combined Dynamic and Static Microsimulation Model," MPRA Paper 7235, University Library of Munich, Germany.
    2. Merz, Joachim & Lang, Rainer, 1997. "Preferred vs. Actual Working Hours - A Ten Years Paneleconometric Analysis for Professions, Entrepreneurs and Employees in Germany," MPRA Paper 7142, University Library of Munich, Germany.
    3. Andreas PEICHL, 2008. "The Benefits of Linking CGE and Microsimulation Models - Evidence from a Flat Tax analysis," EcoMod2008 23800106, EcoMod.
    4. Joachim Merz & Markus Zwick, 2006. "Einkommensanalysen mit Steuerdaten – Mikroanalysen zu hohen Einkommen und Selbständigkeit und Mikrosimulation zu Politikalternativen der Einkommen-, Körperschaft- und Gewerbesteuer," FFB-Discussionpaper 65, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)), LEUPHANA University Lüneburg.
    5. Ralf Maiterth & Heiko Müller, 2009. "Beurteilung der Verteilungswirkungen der „rot-grünen“ Einkommensteuerpolitik," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 129(3), pages 375-390.
    6. Joachim Merz & Henning Stolze & Markus Zwick, 2006. "Wirkungen alternativer Steuerreformmodelle auf die Einkommensverteilung von Freien und anderen Berufen," FFB-Discussionpaper 64, Research Institute on Professions (Forschungsinstitut Freie Berufe (FFB)), LEUPHANA University Lüneburg.
    7. Jinjing Li & Cathal O'Donoghue, 2013. "A survey of dynamic microsimulation models: uses, model structure and methodology," International Journal of Microsimulation, International Microsimulation Association, vol. 6(2), pages 3-55.

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    More about this item

    Keywords

    microsimulation; German tax reform; Karlsruhe proposal; self-employed; professions; entrepreneurs; employees; distributional and redistributional policy impacts; inequality and decomposition of inequality;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D30 - Microeconomics - - Distribution - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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