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Gerrit B. Koester, Summary of findings in:

Gerrit B. Koester

The political economy of tax reforms, page 55 - 56

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

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55 (where we observed barely any reductions) accounts for only 0.8. In our data the local trade tax shows the lowest reform intensity with 0.44.75 Local trade Corporate VAT Wealth tax Wage and income Mineral oil Tobacco 0 0,5 1 1,5 2 2,5 3 3,5 0,00% 2,00% 4,00% 6,00% 8,00% 10,00% 12,00% Reform intensity (absolute sum of increases and reductions 1965-2004/ avg. annual tax revenue) Tax revenues /GDP (Avg. 1964-2004) = Total changes (increases and reductions) /GDP REFORM INTENSITY IN DIFFERENT KINDS OF TAXES Own calculations based on: Federal Ministry of Finance (2004). Figure 23: Tax reforms intensity in main taxes 1.5 Summary of findings What are our main insights based on the new data on tax reforms from 1964 to 2004? First we found that the number of tax reductions dominated total new regulations. The overall extent of tax reductions was as well larger than the overall extent of tax increases, leading to a reduction of the tax burden by on average 0.13% of GDP per year. Most of the new tax regulations were small. Regulations with fiscal effects lower than 0.1% of GDP – accounted for 89% of all reforms. An analysis of the timing of tax reforms showed that tax burden increases and tax burden reductions took often place simultaneously. Tax laws were passed especially in March, June and December of each year and the vast majority of tax reforms became effective in January. 75 See footnote 74. 56 Our analyses by kind of tax revealed that tax burden reductions were strongly dominated by wage and income taxes, while consumption taxes played an important role in tax burden increases. Taking increases and reductions together we found the highest tax reform intensity in wage and income taxes, followed by wealth taxes, mineral oil taxes, corporate profit taxes, VAT and the local trade tax. 2 Reform patterns in the most important taxes So far we have analyzed the overall patterns of reforms based on our new data-set. Now we move on to the analysis of reform patterns within different kinds of taxes. What were the most important reforms (with respect to their fiscal effect) in the main taxes? How did the patterns of fiscal effects of reforms look like for different taxes? How were revenue developments and fiscal effects of reforms linked? 76 We start with the income and wage tax and then move to business taxes, followed by a treatment of VAT and major excises. Finally, we review the most important developments in property taxes. With respect to each tax we shortly review the current regulation and the most important tax reforms in the period analyzed. Then we examine how these reforms are reflected in our data-set of fiscal effects of tax reforms and discuss the pattern of reforms separately for the main German taxes. Finally, we link the reform patterns in the main taxes to revenue developments. An excursus on the macroeconomic development in Germany – as a background for the discussion of revenue developments – closes this part. 76 Overviews of the development of the German tax systems can be found in Boss (1987) (focusing on the 1950s), Offerhaus (1997) (covering 1961-1983), Kruer-Buchholz (1982) (focusing on the time before 1975), Muscheid (1986) (covering 1950-1982), Engels (1989) (focusing on the 80s), Johann (2006) (covering 1983 to 1998) and Leibfritz et al. (1998). An international comparative assessment of tax reforms (excluding Germany) can be found in Sandford (1993). An extensive discussion of the development of the US-American tax system in the 60s, which uses a structure similar to the one applied here is Pechman (1971). A discussion of tax reforms in the US based on their fiscal effects can be found in Schick (1991).

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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.