Is a flat tax reform feasible in a grown-up democracy of Western Europe? A simulation study for Germany

Fuest, Clemens; Peichl, Andreas; Schaefer, Thilo

doi:10.1007/s10797-008-9071-2

Cited by 64 publications

(60 citation statements)

References 27 publications

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“…They find a total effect of 6.2 % for married/cohabiting women with young children. 33 Labour supply effects of a flat tax have often been topic of economic research (Aaberge et al 2000;Fuest et al 2008). Aaberge et al (2000) use a discrete choice model in order to simulate labour supply effects of a flat tax rate in Italy, Norway and Sweden and conclude that a flat tax increases labour supply.…”

Section: Comparison With Literaturementioning

confidence: 99%

“…Aaberge et al (2000) use a discrete choice model in order to simulate labour supply effects of a flat tax rate in Italy, Norway and Sweden and conclude that a flat tax increases labour supply. Fuest et al (2008) use a discrete choice model in order to assess labour supply effects of a flat tax in Germany. They show that a flat tax system, with a low basic allowance and a low marginal tax rate, increases total labour supply (by approximately 90,000 FTEs) but increases income inequality.…”

Section: Comparison With Literaturementioning

confidence: 99%

“…It is important to know which EITC is most promising in boosting employment. A flat tax has often been topic of economic research as well (Aaberge et al 2000;Fuest et al 2008) but these studies do not estimate labour supply responses for several subgroups separately. However, in order to assess these reforms, it is crucial to have a thorough understanding of how several subgroups respond to financial incentives.…”

Section: Introductionmentioning

confidence: 99%

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For Better or for Worse: Tax Reform in the Netherlands

Boer

2016

De Economist

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This paper presents a structural labour supply model for the Netherlands. The model uses a large, rich data set which allows for precise estimates of labour supply elasticities for several subgroups. We use an advanced tax benefit calculator to calculate households' budget constraints accurately. Both the large, rich data set and the advanced tax benefit calculator enable us to perform more accurate policy predictions. Simulations show that labour supply elasticities differ among subgroups. Labour supply elasticities for men in couples are low but labour supply elasticities are much higher for cohabiting/married women. Furthermore, elasticities are relatively high for individuals with a lower education and/or non-Western background. Policy simulations provide two important insights. First, an introduction of either a pure flat tax, or an income-neutral flat tax, decreases aggregate labour supply. Second, an EITC for working parents is more effective in stimulating aggregate labour supply than an EITC for all workers or an overall reduction in marginal tax rates.

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Section: Comparison With Literaturementioning

confidence: 99%

Section: Comparison With Literaturementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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For Better or for Worse: Tax Reform in the Netherlands

Boer

2016

De Economist

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“…In the 1990s, the flat-tax 3 concept dominated most of the income tax reforms in Eastern Europe (cf. Ivanova et al, 2005;Moore, 2005), whereas in Western Europe the concept has not been implemented in any country (Fuest et al, 2008). In Slovenia the flat-tax concept also triggered a lively public discussion six years ago (Government Office for Growth, 2005), although it was ultimately not introduced in practice.…”

Section: Reforming the Personal Income Taxmentioning

confidence: 99%

Distribution of personal income tax changes in Slovenia

Čok

Sambt

Košak

et al. 2012

Post-Communist Economies

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Slovenia belongs to a group of EU member states that have reduced their personal income tax burden during the current financial and economic crisis. The latest changes, introduced in the personal income tax system during the last two years, have primarily reduced the tax burden on low-income taxpayers. However, this was only the last step in a series of personal income tax reforms since 2004 that have on average reduced the tax burden on all taxpayers. Using an exclusive database of taxpayers and utilising a general-equilibrium modelling platform, we assess the consequences of these reforms at both the micro and the macro level. From a macroeconomic point of view, the initial positive consequences of higher private consumption and welfare are declining over time due the increased budget deficit and reduced investment.

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“…For Germany, there are several studies on basic income and flat-tax schemes scenarios (see, e.g. Colombo et al 2008;Fuest et al 2008;Straubhaar 2008;Horstschräer et al 2010), however, none of them considers a tax and transfer schedule that is flat over the whole range of taxable income and does not include a basic allowance. Moreover, most of the scenarios are not revenue neutral.…”

Section: Introductionmentioning

confidence: 99%

Getting the Poor to Work: Three Welfare Increasing Reforms for a Busy Germany

2015

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe study three budget-neutral reforms of the German tax and transfer system designed to improve work incentives for people with low incomes: a feasible flat tax reform that provides a basic income which is equal to the current level of the means tested unemployment benefit, and two alternative reforms that involve employment subsidies to stimulate participation and full-time work, respectively. We estimate labor supply reactions and welfare effects using a microsimulation model based on household data from the Socio-Economic Panel (SOEP) and a structural labor supply model. We find that all three reforms increase labor supply in the first decile of the income distribution. However, the flat tax scenario reduces overall labor supply by 4.9%, the reform scenario designed to increase participation reduces labor supply by 1%, while the reform that provides improved incentives to work full-time has negligible effects on overall labor supply. With equal welfare weights, aggregate welfare gains are realizable under all three reforms.

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Is a flat tax reform feasible in a grown-up democracy of Western Europe? A simulation study for Germany

Abstract: Flat Tax reform, Equity, Efficiency, Distribution, Welfare, D31, D60, H20,

Cited by 64 publications

References 27 publications

For Better or for Worse: Tax Reform in the Netherlands

For Better or for Worse: Tax Reform in the Netherlands

Distribution of personal income tax changes in Slovenia

Getting the Poor to Work: Three Welfare Increasing Reforms for a Busy Germany

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