Earlier or Later: A General Equilibrium Analysis of Bringing Forward an Already Announced Tax Reform

38 Pages Posted: 5 Nov 2004

See all articles by Bernd Raffelhüschen

Bernd Raffelhüschen

University of Freiburg; University of Bergen; CESifo (Center for Economic Studies and Ifo Institute)

Stefan Moog

University of Freiburg

Josef Honerkamp

University of Freiburg

Date Written: October 2004

Abstract

The German Income Tax Reform 2000, which announced a reduction in income tax rates to be implemented in a series of three stages, was welcomed by the public as a step towards unleashing lurking growth potentials. Nonetheless, in the course of the year 2001 a dispute arose, centering around the question as to whether or not the later stages of the German Income Tax Reform should be brought forward. The present paper assesses the welfare and macroeconomic consequences of the German Income Tax Reform in the scope of a simplified DGE model of the Auerbach-Kotlikoff type and deals explicitly with the issue of bringing forward an already announced tax reform. As well as evaluating the considered fiscal policy options in terms of their (social) welfare implications we also touch on the political economy aspects of implementing a tax reform.

Keywords: German Tax Reform, early tax reform, overlapping generations, DGE model

JEL Classification: H24, H31

Suggested Citation

Raffelhueschen, Bernd and Moog, Stefan and Honerkamp, Josef, Earlier or Later: A General Equilibrium Analysis of Bringing Forward an Already Announced Tax Reform (October 2004). Available at SSRN: https://ssrn.com/abstract=614882 or http://dx.doi.org/10.2139/ssrn.614882

Bernd Raffelhueschen (Contact Author)

University of Freiburg ( email )

Fahnenbergplatz
Freiburg, D-79085
Germany
49-7612032353 (Phone)
49-7612042290 (Fax)

University of Bergen

Muséplassen 1
N-5008 Bergen, +47 55 58
Norway

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Stefan Moog

University of Freiburg ( email )

Fahnenbergplatz
Freiburg, D-79085
Switzerland

Josef Honerkamp

University of Freiburg ( email )

Fahnenbergplatz
Freiburg, D-79085
Switzerland