Hans Fehr, Manuel Kallweit, Fabian Kindermann

Reforming Family Taxation in Germany – Labor Supply versus Insurance Effects

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Jahrgang 71 () / Heft 1, S. 53-81 (29)

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The present paper quantifies the economic consequences of eliminating the system of income splitting in Germany. We apply a dynamic simulation model with overlapping generations where single and married agents decide on labor supply and homework under income and life-span risk. We compute welfare changes across households and isolate aggregate efficiency effects of a move towards either individual taxation or family splitting. In terms of economic efficiency a switch towards individual taxation performs better than family taxation, due to reduced labor market distortions and improved insurance provision. The efficiency increases even further when individual taxation is combined with a child-splitting factor. Since such a reform also has very favorable distributional consequences, it should be seriously considered in the political debate.

Hans Fehr Born 1962; 1983–89 studied economics at the University of Regensburg and Boulder/Colorado; 1989–98 wiss. Assistent at the Universities of Regensburg and Tübingen; 1992 Promotion; 1998 habilitation.

Manuel Kallweit Keine aktuellen Daten verfügbar.

Fabian Kindermann Geboren 1984; 2008 Diplom-Wirtschaftsmathematiker; 2008–12 Wissenschaftlicher Mitarbeiter am Lehrstuhl für Finanzwissenschaft an der Universität Würzburg; 2012 Promotion; von Oktober 2012 bis September 2013 Forschungsaufenthalt an der Northwestern University, Evanston, IL, USA.