Welfare Effects of Dynamic Tax Reforms

Various fiscal reform packages are presently on the political agenda in Germany. In his work, Hans Fehr develops a consistent framework for examining the consequences of these for distribution and efficiency. More specifically, he analyzes reform proposals for personal income and corporate taxes and for the German pension system as well as the deficit policy. This quantitative analysis is based on a dynamic simulation model of the Auerbach-Kollikoff type which features a number of innovations: complex progressive income taxes and pension contributions, intragenerational heterogeneity and the disaggregation of the effects on welfare into individual redistribution and efficiency components. The numerical simulations indicate that the existing excess burdens of the tax system are quite high in Germany and that especially progressive consumption taxation and minimum pensions financed by contributions might be some interesting reform options for the future.Introduction - A Primer to the German Fiscal System - Modeling the Economy - Calibration and Numerical Solution - Fiscal Incidence in a Simple Two-Period Model - Who Bears the Tax Burden in Germany? - Fundamental Tax Reform - Options for Pension Reform - Public Debt Reduction - General Summary and Outlook