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Distributional and Fiscal Effects of the German Tax Reform 2000: A Behavioral Microsimulation Analysis

Discussion Papers 419, 28 S.

Peter Haan, Viktor Steiner

2004. Apr.

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In the year 2000, the German government passed the most ambitious tax reform in postwar German history aiming at a significant tax relief for households. Drawing on data of the GSOEP, we analyze the distributional and fiscal effects of the tax reform. Our analysis employs microsimulation techniques. Furthermore, we estimate behavioral effects of the tax reform using a discrete choice labor supply model. We find that the tax reform leads to a significant increase of net household income. The relative gains increase with taxable income, thus income inequality is rising. We also find that behavioral effects reduce the revenue loss.

Peter Haan

Head of Department in the Public Economics Department

Topics: Taxes

JEL-Classification: H24;H31;J22
Keywords: Tax reform; Behavioral effects; Distribution and fiscal effects
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