Fifty years of income tax reform: Comments on reform measures since the major tax reform of 1955

In recent decades a great number of income tax reform proposals have been presented which, however, with the exception of the sales tax reform of 1967 and the corporation tax reform of 1977, were not put into effect. Prof. Dieter Dziadkowski, who was one of the tax experts of the Bareis Commission, provides an overview of 50 years of attempts at income tax reform and discusses the current proposals. Since the Ifo Institute has closely followed and participated in the reform discussions, Prof. Dziadkowski includes the proposals of the Ifo Institute. His summary of 50 years of tax reform: “My favourite proposal is that of the German Council of Economic Advisors for the introduction of a dual income tax. Since the majority on the Scientific Advisory Board favours a flat tax, but also expects considerable benefits from a dual income tax in comparison to the present situation, fundamental tax reform is indeed possible in the foreseeable future. This assumption is not unrealistic if one considers the statements of the Federal Minister of Finance. On the other hand, experience since the reform of 1955 has taught us that the best intentions to carry out reforms can fail. Although the main aims of all participants in the reform discussion are similar, no comprehensive agreement has yet been achieved. Perhaps a consensus can be reached over dual income tax proposal.