Distributional Effects of the German Tax Reform 2000 - A Behavioral Microsimulation Analysis

Peter Haan and Viktor Steiner

Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, 2005, vol. 125, issue 1, 39-49

Abstract: In the year 2000, the German government passed the most ambitious tax reform in postwar German history aiming at significant tax relief for households. We analyze the effects of this reform on the distribution of household incomes using a behavioral microsimulation model based on representative micro-data from the German Socio-Economic Panel (SOEP). Our empirical analysis accounts for the effects of bracket creeping and labor supply adjustment on the distribution of household incomes. We find that the tax reform leads to a significant increase in net household income. The relative gains increase with taxable income, thus income inequality is rising. This is slightly mitigated by the impact of the labor supply responses induced by the reform, especially at the lower end of the income distribution.

JEL-codes: H24 H31 J22 (search for similar items in EconPapers)
Date: 2005
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