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Earlier Or Later: A General Equilibrium Analysis of Bringing Forward an Already Announced Tax Reform

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Author Info
Josef Honerkamp (University of Freiburg, Dept. of Physics, Germany)
Stefan Moog (University of Freiburg, Dept. of Economics, Germany)
Bernd Raffelhüeschen (University of Freiburg, Dept. of Economics, Germany & University of Bergen, Norway)
Abstract

The German Income Tax Reform 2000, which announced a reduction in income tax rates to be implemented in a series of three stages, was welcomed by the public as a step towards unleashing lurking growth potentials. Nonetheless, in the course of the year 2001 a dispute arose, centering around the question, whether or not the later stages of the German Income Tax Reform should be brought forward. The present paper assesses the welfare and macroeconomic consequences of the German Income Tax Reform in the scope of a simplified DGE model of the Auerbach-Kotlikoff type and deals explicitly with the issue of bringing forward an already announced tax reform. Besides evaluating the considered fiscal policy options in terms of their (social) welfare implications we touch on the political economy aspects of implementing a tax reform.

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Paper provided by EconWPA in its series Public Economics with number 0409012.

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Length: 32 pages
Date of creation: 24 Sep 2004
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Handle: RePEc:wpa:wuwppe:0409012

Note: Type of Document - pdf; pages: 32
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Related research
Keywords: German Tax Reform; early tax reform; overlapping generations; DGE model;

Find related papers by JEL classification:
D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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