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. 51 NEW TAX REGULATIONS (WITH FISCAL EFFECTS) BY SIZE 0 100 200 300 400 500 -0.015 -0.010 -0.005 0.000 0.005 0.010 Series: REFORMSFE Sample 1 1047 Observations 913 Mean -5.58e-05 Median -6.05e-06 Maximum 0.009039 Minimum -0.015219 Std. Dev. 0.001232 Skewness -3.122859 Kurtosis 52.33076 Jarque-Bera 94059.28 Probability 0.000000 Own calculations based on: Federal Ministry of Finance (2004). Fiscal effects of new regulations/ GDP # Figure 19: Tax reforms by size (Histogram) 1.3 Timing of reforms Our data-set allows us to analyze the timing of the adoption of tax reforms (reflecting tax policy activity) as well as the implementation of tax reforms (reflecting effective changes in the tax burden). We find that the legislative implemented the lowest number of regulations in January, April and May (upper part of Figure 20). High activity can be observed in March (9.1% of all new regulations) and June (11.6% of all regulations). However, the lion’s share of regulations was passed in December (41.5% off all regulations).73 73 This finding is supported by an alternative analysis of data from the “Bundessteuerblatt” (see Blasch et al. (2006)).