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

Listed author(s):
  • 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)

Registered author(s):

    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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    File URL: http://econwpa.repec.org/eps/pe/papers/0409/0409012.pdf
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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
    Handle: RePEc:wpa:wuwppe:0409012
    Note: Type of Document - pdf; pages: 32
    Contact details of provider: Web page: http://econwpa.repec.org

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    1. Milesi-Ferretti, Gian Maria & Roubini, Nouriel, 1998. "Growth Effects of Income and Consumption Taxes," CEPR Discussion Papers 1979, C.E.P.R. Discussion Papers.
    2. King, Robert G & Rebelo, Sergio, 1990. "Public Policy and Economic Growth: Developing Neoclassical Implications," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 126-150, October.
    3. Jones, Larry E & Manuelli, Rodolfo E & Rossi, Peter E, 1993. "Optimal Taxation in Models of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 485-517, June.
    4. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
    5. Boss, Alfred, 2000. "Steuer- und Ausgabenpolitik in Deutschland," Kiel Working Papers 975, Kiel Institute for the World Economy (IfW).
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    7. Gary D. Hansen & Edward C. Prescott, 1992. "Recursive methods for computing equilibria of business cycle models," Discussion Paper / Institute for Empirical Macroeconomics 36, Federal Reserve Bank of Minneapolis.
    8. Edward C. Prescott & Rajnish Mehra, 2005. "Recursive Competitive Equilibrium: The Case Of Homogeneous Households," World Scientific Book Chapters, in: Theory Of Valuation, chapter 11, pages 357-371 World Scientific Publishing Co. Pte. Ltd..
    9. S. Rao Aiyagari, 1994. "Optimal capital income taxation with incomplete markets, borrowing constraints, and constant discounting," Working Papers 508, Federal Reserve Bank of Minneapolis.
    10. Kenneth L. Judd, 1982. "Redistributive Taxation in a Simple Perfect Foresight Model," Discussion Papers 572, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    11. Gruner, Hans Peter & Heer, Burkhard, 2000. "Optimal Flat-Rate Taxes on Capital--A Re-examination of Lucas' Supply Side Model," Oxford Economic Papers, Oxford University Press, vol. 52(2), pages 289-305, April.
    12. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
    13. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    14. Ehrentraut, Oliver & Raffelhüschen, Bernd, 2003. "Die Rentenversicherung unter Reformdruck: Ein Drama in drei Akten," Discussion Papers 109, Albert-Ludwigs-Universität Freiburg, Institut für Finanzwissenschaft.
    15. Summers, Lawrence H, 1981. "Capital Taxation and Accumulation in a Life Cycle Growth Model," American Economic Review, American Economic Association, vol. 71(4), pages 533-544, September.
    16. Ehrentraut, Oliver & Raffelhüschen, Bernd, 2003. "Die Rentenversicherung unter Reformdruck: Ein Drama in drei Akten," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1949 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 83(11), pages 711-720.
    17. Stefan Homburg, 2000. "German Tax Reform 2000. Description and Appraisal," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(4), pages 504-513, August.
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