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Gerrit B. Koester, A new data-set on tax reforms in Germany in:

Gerrit B. Koester

The political economy of tax reforms, page 38 - 40

An empirical analysis of new German data

1. Edition 2009, ISBN print: 978-3-8329-4131-4, ISBN online: 978-3-8452-1609-6 https://doi.org/10.5771/9783845216096

Series: Neue Studien zur Politischen Ökonomie, vol. 5

Bibliographic information
38 A fifth source of data are legislative statistics, which are available from the German parliament, the Bundestag.46 The advantage of these data is that they allow for quantitative analyses of the legislative process. However, these quantitative analyses make far-reaching transformations of the data necessary. While some studies based on these data exist,47 a separate study of tax legislation is still missing. A sixth source of is the “federal tax journal” (“Bundessteuerblatt”) which is subscribed to especially by tax lawyers and tax consultants. Most tax laws changes (with exception for example of changes in some consumption taxes) are published in the federal tax journal. Blasch et al. (2006) have compiled a data-set on tax laws based on the federal tax journal that includes quantitative indicators like number and extent of tax law changes (by number of pages).48 The advantage of this data-set is that is makes direct quantitative analysis of tax policy possible. The main disadvantage is that the data-set does not include information about the direction of tax policy changes (increases or reductions of the tax burden) and that the data-set does not include an indicator to compare the importance of different tax reforms Finally, the seventh possible source of data (which we concentrate on here) is data from the Federal Ministry of Finance on the most important tax policy changes and their fiscal effects. These data are published in the annual reports of the Ministry and summarized in a new data-set for the time from 1964 to 2004.49 Compared to studies based on data from the federal tax journal this data-set has the important advantage that we have a quantitative indicator (fiscal effects) which allows us to assess the importance of different reforms as well as their direction (reduction or increase of the tax burden). The disadvantage is that we cannot know per se whether the data on fiscal effects of tax reforms (which is calculated and published by the Federal Ministry of Finance) are reliable or strongly biased. Therefore, we first describe and transform the data-set (see part III.2) and then discuss its reliability (part III.3). 2 A new data-set on tax reforms in Germany The German Federal Ministry of Finance offers highly promising data for empirical research in tax policy. The fiscal reports – published annually by the German Federal Ministry of Finance – include the most important tax law changes and since 1964 the Federal Ministry of Finance has published estimates of the expected fiscal effects of tax reforms and new regulations for the first 12 months of being fully 46 See for example the data handbook of the Bundestag: http://www.bundestag.de /bic/dbuch/start.pdf. 47 See e.g. the discussion in Burkhart/Manow (2006). 48 Blasch et al. (2006) have analyzed the timing of new regulations, the development of complexity (as measured by number of pages) and the influence of divided government on tax policy in Germany from 1950 to 2005. 49 Analyses of this data-set are rare so far. An analysis with respect to income taxes is Corneo (2005) and some more general points can be found in Wagschal (2005). 39 effective. The data on tax reforms from 1964 to 2004 are summarized in one publication.50 Within the time period from 1964 to 2004 this compilation of tax reforms includes 1,045 new regulations grouped into 223 tax reform packages. We observe 517 tax burden reductions and 396 tax burden increases while 132 new regulations had no fiscal effects (see Figure 13). 223 517 396 132 1045 TAX REFORMS NEW REGULATIONS EFFECTS TAX BURDEN INCREASES TAX BURDEN REDUCTIONS OTHERS NUMBER OF TAX REFORMS AND NEW REGULATIONS Own calculations based on: Federal Ministry of Finance (2004)/compilation of tax reforms from annual reports. Figure 13: Number of tax reforms, new regulations, increases and reductions Based on the fiscal effects included in the data-set we are able to gain new insights on tax policy and have “first-hand-data” to test existing and competing theories of tax policy. However, the quality of the results of such an empirical analysis largely depends on the reliability of the official data. Therefore we discuss the accuracy of the projections of the Federal Ministry of Finance in the next section, before we move on to the empirical analysis in part IV. 50 See Federal Ministry of Finance (2004). 40 3 Reliability of the data The data-set on tax legislation, which we want to employ here, is based on ex-ante projections. How reliable are these data? Generally two questions are especially important. First, we cannot know whether the expected fiscal effects reflect “planning or propaganda”51. It does not seem implausible that political attempts to delude voters play an important role in calculating the expected fiscal effects of tax reforms. Studies on fiscal planning (Heinemann 2006) or on tax revenue forecasts (Bischoff/Gohout 2006) indicate that such a bias in German government projections cannot per se be excluded. Second, even if the calculations of expected fiscal effects reflect unbiased predictions, it remains to be seen how accurate the fit in between expected and real effects is. -12% -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 19 65 19 67 19 69 19 71 19 73 19 75 19 77 19 79 19 81 19 83 19 85 19 87 19 89 19 91 19 93 19 95 19 97 19 99 20 01 20 03 20 05 TAX REFORMS (IMPLEMENTED)/TAX REVENUES TAX REFORMS (ADOPTED)/TAX REVENUES ADOPTION AND IMPLEMENTATION OF TAX REFORMS Fiscal effects tax reforms/ Total tax revenues Own calculations based on: Federal Ministry of Finance (2004)/Federal Statistical Office/tax laws. Figure 14: Fiscal effects of tax reforms (adopted/implemented) How should we test the reliability of the data? If the projections of fiscal effects of tax reforms are largely correct, we should be able to relate the reform effects to revenue developments. Together with macroeconomic developments, which directly 51 To use the title of an article which analyzed government budget planning and finds evidence for strong biases in fiscal projections (Heinemann 2006).

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Zusammenfassung

Was bestimmt die Steuerpolitik? Welche Ziele verfolgen die Bundesregierungen bei Steuerreformen? Haben Steuererhöhungen und Steuersenkungen einen Einfluss auf die Wahlergebnisse? Auf der Basis eines neuen Datensatzes zu den fiskalischen Effekten von Steuerreformen im Zeitraum von 1964 bis 2004 zeigt das Werk Muster der Steuerpolitik auf und testet zentrale ökonomische Hypothesen. Dabei zeigt sich, dass normative ökonomische Ansätze kaum einen Erklärungsbeitrag für die zu beobachtende Steuerpolitik leisten können.

Ausgehend von wichtigen polit-ökonomischen Theorien zeigt der Autor, dass die Mehrheitskonstellationen im Bundesrat einen wichtigen Einfluss auf die Steuerpolitik haben, allerdings genau umgekehrt wie von der Blockade-Hypothese behauptet: Steuerreformen sind gemessen an ihren Fiskaleffekten bei gegenläufigen Mehrheiten in Bundestag und Bundesrat häufiger und umfangreicher. Des Weiteren gibt es keine Hinweise darauf, dass die parteipolitische Zusammensetzung der Bundesregierung einen wichtigen Einfluss auf Steuerreformen hat. Wahltaktische Terminierungen von Steuerreformen spielen aber sehr wohl eine wichtige Rolle. Eine Auswertung des Zusammenhangs von Steuerreformen und Wahlergebnissen zeigt allerdings, dass die Versuche der Bundesregierungen, ihre Wiederwahlwahrscheinlichkeit durch Steuersenkungen kurz vor der Wahl zu erhöhen, wenig erfolgreich sind: Nicht nur die Jahre unmittelbar vor den Wahlterminen, sondern die Steuerpolitik in der gesamten Legislaturperiode hat einen Einfluss auf die Bundestagswahlergebnisse der regierenden Parteien.