Content

Gerrit B. Koester, The role of reunification and temporary measures in:

Gerrit B. Koester

The political economy of tax reforms, page 48 - 50

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
48 IV Tax reforms in Germany 1964-2004 What can we learn from the new data-set on tax reforms? In this part we take a closer look at the data on tax reforms and derive new insights on tax policy in Germany from 1964 to 2004. We start with an overall analysis of the data and then move on to a detailed analysis by kind of tax. 1 New insights on tax reforms in Germany from 1964 to 2004 As we showed in part III, our data-set consists of 1,045 new regulations: 517 reductions of the tax burden, 396 increases and 132 regulations, which were neutral with respect to tax revenues (see Figure 13 on page 39). 0 2 4 6 8 10 12 TAX REFORMS 0 20 40 60 80 100 NEW REGULATIONS 0 20 40 60 REDUCTIONS 0 20 40 60 80 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 INCREASES TIMING OF TAX REFORMS, GERMANY, 1964-2004 Own calculations based on: Federal Ministry of Finance (2004). Absolute Absolute Absolute Absolute Figure 17: Reforms and new regulations 1964-2004 Figure 17 shows the distribution of reforms and new regulations from 1964 to 2004. We see a high number of tax reforms (displayed here by the date of adoption) from 49 1964 to the early 1980s, a reduction of the number of tax reforms from the early 1980s till the mid-1990s and a strong increase again after 1996. If we analyze the development of the number of new regulations (shown in the second row of Figure 17) we see that the number of new regulations increased strongly after 1990 and was on average a lot higher after 1990 than before reunification. A separate analysis of tax burden reductions and increases (row 3 and 4 of Figure 17) shows a similar pattern (with an increased average number of reductions and increases after reunification in 1990). Furthermore, we see that reductions were more frequent than increases (especially till 1991) and that increases and reductions often took place in the same years. Over the period analyzed we find an average of 5.6 reforms and 26.2 new regulations per year, which can be split up in 12.9 reductions and 9.9 increases. On average the fiscal effects of reductions per year were with 0.57% of GDP slightly higher than the fiscal effects of decreases with 0.44% of GDP, leading to an average net reduction of the tax burden via tax reforms by -0.13% of GDP per year.70 -2,5% -2,0% -1,5% -1,0% -0,5% 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 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 FISCAL EFFECTS/GDP -3,0% -2,5% -2,0% -1,5% -1,0% -0,5% 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 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 INCREASES/GDP REDUCTIONS/GDP FISCAL EFFECTS OF TAX REFORMS, GERMANY, 1964-2004 Fiscal effects of tax reforms/GDP Fiscal effects of tax reforms/GDP Data on adopted reforms. Data on adopted reforms. Own calculations based on: Federal Ministry of Finance (2004). Figure 18: Fiscal effects of tax reforms 1964-2004 70 For detailed descriptive statistics see as well Table 9 on page 126. 50 In Figure 18 we display the fiscal effects of tax reforms (measured as fiscal effects of tax reforms over GDP). We see a strong increase of the tax burden by tax reforms in 1973, followed by a strong reduction in the year thereafter. From 1975 to 1991 net reductions by tax reforms dominated, while tax reforms increased the tax burden strongly from 1991 to 1993. A separate display of reductions and increases (see lower part of Figure 18) shows that the average annual reductions and increases of the tax burden by tax reforms were as well stronger after reunification. 1.1 The role of reunification and temporary measures If we take a look at the net fiscal effects of tax reforms from 1965 to 2004 (upper part of Figure 18), two points are striking: first the strong increases with the following contraction around 1974 and second the strong net increases of the tax burden from 1991 to 1993. Both developments resulted from extraordinary events. The strong increase and reduction around 1974 was a consequence of attempts to smoothen the business cycle (see excursus in part III.3) and the strong increase in 1991 to 1993 (by date of adoption of reforms) resulted from reunification in 1990 (here the introduction of a solidarity surcharge had an important influence). To make sure that our analyses (especially in part V where we test economic hypotheses of tax policy based on our data-set) are not distorted, we control for the influence of these extraordinary developments in the following. 1.2 New regulations by fiscal effects Tax policy in Germany from 1964 to 2004 was dominated by small reforms. Figure 19 displays a histogram of the distribution of reforms by size, measured by expected fiscal effects over GDP.71 We include here only the reductions and increases with fiscal effects (a total number of 913).72 We find that new regulations (increases as well as reductions) with an effect of less than 0.1% of GDP dominated. 809 of the 913 reforms in our data-set (equaling 89%) fell into this category. The number of outliers was very small. The strongest reduction within a single new regulation was with -1.5% of GDP larger than the strongest single increase (with 0.9% of GDP). The distribution of regulations with an extent of more than 0.5% of GDP to increases (a total of 6) and to reductions (a total of 7) was similar. 71 We excluded the new regulations with no fiscal effects. 72 Stanley Winer pointed me at the importance to include a histogram of fiscal effects of reforms.

Chapter Preview

References

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.