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

Author

Listed:
  • Honerkamp, Josef
  • Moog, Stefan
  • Raffelhüschen, Bernd

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.

Suggested Citation

  • Honerkamp, Josef & Moog, Stefan & Raffelhüschen, Bernd, 2004. "Earlier or Later: A General Equilibrium Analysis of Bringing Forward an Already Announced Tax Reform," Discussion Papers 123, Albert-Ludwigs-Universität Freiburg, Institut für Finanzwissenschaft.
  • Handle: RePEc:zbw:alufin:123
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    File URL: https://www.econstor.eu/bitstream/10419/22997/1/123_04.pdf
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    References listed on IDEAS

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    1. Stefan Homburg, 2000. "German Tax Reform 2000. Description and Appraisal," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(4), pages 504-513, August.
    2. 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..
    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. Georg Hirte, 2002. "Welfare and Macroeconomic Effects of the German Pension Acts of 1992 and 1999: A Dynamic CGE Study," German Economic Review, Verein für Socialpolitik, vol. 3(1), pages 81-106, February.
    5. Jochen Michaelis & Michael Pflüger, 2000. "The impact of tax reforms on unemployment in a SMOPEC," Journal of Economics, Springer, vol. 72(2), pages 175-201, June.
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    Cited by:

    1. Franco Mariuzzo & Patrick Paul Walsh & Ciara Whelan, 2004. "EU Merger Control in Differentiated Product Industries," CESifo Working Paper Series 1312, CESifo Group Munich.

    More about this item

    Keywords

    German Tax Reform; early tax reform; overlapping generations; DGE model;

    JEL classification:

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

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