IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_5626.html
   My bibliography  Save this paper

Effects of Bracket Creep and Tax Reform on Average Personal Income Tax Burden in Germany

Author

Listed:
  • Chang Woon Nam

    ()

  • Christoph Zeiner

    ()

Abstract

This study aims at contributing to the ongoing debates on the bracket creep, whether Germany needs an integration of inflation indexation into its personal income tax system in order to re-duce distortions of tax liabilities and additional tax burdens. On the other hand, Germany has continuously flattened the personal income tax rates in the context of a series of tax reforms and modified its tax system. Under the consideration of the major goals of these reforms this study compares the extent to which the previous reform efforts, made in this country since 1958, have led to the change of the real, inflation-adjusted average personal income tax burden of the single earners in 2014. By doing so, it highlights that understanding the tax reform from a nominal point of view alone can fail to capture all the, also some ‘unexpected’, real changes in average tax burden, when the ‘hidden’ distortion caused by inflation prevails. According to the long-term real view adopted in this study, the evolution of German personal income tax system made the middle-income single earners worse-off, while the lower as well as the higher income groups are significantly better off.

Suggested Citation

  • Chang Woon Nam & Christoph Zeiner, 2015. "Effects of Bracket Creep and Tax Reform on Average Personal Income Tax Burden in Germany," CESifo Working Paper Series 5626, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_5626
    as

    Download full text from publisher

    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp5626.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Heer, Burkhard & Süssmuth, Bernd, 2013. "Tax bracket creep and its effects on income distribution," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 393-408.
    2. Herwig Immervoll, 2005. "Falling Up The Stairs: The Effects Of "Bracket Creep" On Household Incomes," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(1), pages 37-62, March.
    3. Alfred Boss & Hans Müller-Dröge & Axel Schrinner, 2014. "Einkommensteuerbelastung ausgewählter Haushaltstypen in Deutschland 1958 bis 2013," Wirtschaftsdienst, Springer;German National Library of Economics, vol. 94(3), pages 187-193, March.
    4. Giacomo Corneo, 2005. "The Rise and Likely Fall of the German Income Tax, 1958–2005," CESifo Economic Studies, CESifo, vol. 51(1), pages 159-186.
    5. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
    6. Rolf Aaberge & Ugo Colombino, 2005. "Designing Optimal Taxes With a Microeconometric Model of Household Labour Supply," Public Economics 0510013, EconWPA.
    7. Keen, Michael & Papapanagos, Harry & Shorrocks, Anthony, 2000. "Tax Reform and Progressivity," Economic Journal, Royal Economic Society, vol. 110(460), pages 50-68, January.
    8. Michael Broer, 2011. "Kalte Progression in der Einkommensbesteuerung," Wirtschaftsdienst, Springer;German National Library of Economics, vol. 91(10), pages 694-698, October.
    9. Katja Rietzler & Dieter Teichmann & Achim Truger, 2014. "Abbau der kalten Progression: nüchterne Analyse geboten," Wirtschaftsdienst, Springer;German National Library of Economics, vol. 94(12), pages 864-871, December.
    10. Stefan Bach & Peter Haan & Richard Ochmann, 2013. "Reformvorschläge zur Einkommensteuer: mehr echte und weniger kalte Progression," DIW Wochenbericht, DIW Berlin, German Institute for Economic Research, vol. 80(30), pages 3-12.
    11. Saez, Emmanuel, 2003. "The effect of marginal tax rates on income: a panel study of 'bracket creep'," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1231-1258, May.
    12. Gouveia, Miguel & Strauss, Robert P., 1994. "Effective Federal Individual Tax Functions: An Exploratory Empirical Analysis," National Tax Journal, National Tax Association;National Tax Journal, vol. 47(2), pages 317-339, June.
    13. Boss, Alfred & Ente, Werner, 1988. "Die Einkommensteuertarife 1965, 1986 und 1990: Wo liegen die Unterschiede," Open Access Publications from Kiel Institute for the World Economy 1375, Kiel Institute for the World Economy (IfW).
    14. Gouveia, Miguel & Strauss, Robert P., 1994. "Effective Federal Individual Tax Functions: An Exploratory Empirical Analysis," National Tax Journal, National Tax Association, vol. 47(2), pages 317-39, June.
    15. Robert K. Triest, 1990. "The Effect of Income Taxation on Labor Supply in the United States," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 491-516.
    16. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    17. Jakobsson, Ulf, 1976. "On the measurement of the degree of progression," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 161-168.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Clemens Fuest & Björn Kauder & Luisa Lorenz & Martin Mosler & Niklas Potrafke & Florian Dorn, 2016. "Heimliche Steuererhöhungen – Belastungswirkungen der Kalten Progression und Entlastungswirkungen eines Einkommensteuertarifs auf Rädern," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 76.

    More about this item

    Keywords

    personal income taxation; bracket creep; real average tax burden; single earners; coefficient of residual income progression; Germany;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_5626. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe). General contact details of provider: http://edirc.repec.org/data/cesifde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.