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Gerrit B. Koester, Summary in:

Gerrit B. Koester

The political economy of tax reforms, page 84 - 85

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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84 Cumulated fiscal effects of tax reforms increased strongly in 1974 (driven by the real estate, the real estate acquisition and the net wealth tax). In 1997 cumulated reform effects of real estate and real estate acquisition tax were pushed up strongly by rate increases, while the abolishment of the net wealth tax had a negative effect (see the lower part of Figure 38). If we link cumulated reform effects and revenue developments, we find that the reform of standard values in 1974 stopped the downward trend in real estate taxes. Furthermore, revenues of real estate and real estate acquisition taxes increased strongly after the 1996/1997 reform. This led to overall stable property tax revenues despite the abolishment of the net wealth tax. Overall the share of tax revenues of the property taxes over all tax revenues has been very stable since the early 1970s not at least because of very low reform activities. 2.6 Summary What are the most important results from our analyses of reform patterns by kind of tax? First, we found that the general patterns of tax reforms differ strongly by kind of tax (see Figure 39). We found frequent and important reforms in wage and income taxes. Here tax reductions dominated and the fiscal effects of tax burden reductions were twice as high as the fiscal effects of tax burden increases. In business taxes, we observed barely any fiscally important changes via the corporate profit tax and the local trade tax until the mid-1970s. For the whole period covered we observed that almost all reforms in corporate profit and local trade taxation reduced the tax burden of businesses. In consumption taxes (VAT, mineral oil and tobacco taxes), we saw very frequent changes with large fiscal effects. We found that almost all tax reforms in these taxes led to increases in tax revenues. Property taxes were largely characterized by inactivity of tax policy. With respect to the detailed analyses of reforms in the different taxes, we found that the tax reforms with the most important fiscal effects were changes of the tariff schedule and of tax rates. This was especially true for the consumption taxes, but held as well in wage and income and the corporate profit taxes. The link in between cumulated tax reforms and revenue developments differed strongly by kind of tax. In the wage and income tax, cumulated reform effects were able to contribute to our understanding of the overall trend in revenues, but not of the divergent development of the different components of the wage and income tax (see part IV.2.1). In business taxes, some major reforms were reflected in the revenue development, but overall the link in between reforms and revenue developments was only weak. In the VAT, we were able to directly link rate changes and revenue developments. In mineral oil and tobacco taxes we saw some direct links in between tax reforms and revenue developments, but overall price and sales volume changes 85 dominated the revenue pattern. In the property taxes changes in revenue were very limited, not at least as a result of low reform activities. REFORM PATTERNS BY KIND OF TAX -2,00% -1,50% -1,00% -0,50% 0,00% 0,50% 1,00% 1,50% 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 REDUCTIONS INCREASES WAGE AND INCOME TAX REFORMS Based on: Federal ministry of finance; annual reports, 1964-2004. -2,00% -1,50% -1,00% -0,50% 0,00% 0,50% 1,00% 1,50% 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 REDUCTIONS INCREASES I Based on: Federal ministry of finance; annual reports, 1964-2004. PROPERTY TAX REFORMS -0,02% 0,00% 0,02% 0,04% 0,06% 0,08% 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 INCR RED INHERITANCE TAX -0,10% -0,05% 0,00% 0,05% 0,10% 0,15% 0,20% 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 INCR RED REAL ESTATE ACQUISITION TAXES -0,30% -0,20% -0,10% 0,00% 0,10% 0,20% 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 INCR RED NET WEALTH TAX Own calculations based on : Federal Ministry of Finance (2004)/Tax laws.Reforms by date of implementation. -0,02% 0,00% 0,02% 0,04% 0,06% 0,08% 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 INCR RED I E IT E T X -0,10% -0,05% 0,00% 0,05% 0,10% 0,15% 0,20% 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 INCR RED E L EST TE ISITI T XES -0,30% -0,20% -0,10% 0,00% 0,10% 0,20% 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 5 INCR RED ET E LT T X Own calculations based on : Federal Ministry of Finance (2004)/Tax laws.Reforms by date of implementation. CONSUMPTION TAX REFORMS Based on: Federal ministry of finance; annual reports, 1964-2004. -0,10% 0,00% 0,10% 0,20% 0,30% 0,40% 0,50% 0,60% EF F 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 0 2 4 RED INCR MINERAL OIL TAX -0,05% 0,00% 0,05% 0,10% 0,15% 0,20% 0,25% EF F 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 0 2 4 RED INCR TOBACCO TAX -0,20% -0,10% 0,00% 0,10% 0,20% 0,30% 0,40% 0,50% 0,60% EF F 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 0 2 4 Reductions Increases VAT I Based on: Federal ministry of finance; annual reports, 1964-2004. -0,10% 0,00% 0,10% 0,20% 0,30% 0,40% 0,50% 0,60% EF F 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 0 2 4 RED INCR I L IL T -0,05% 0,00% 0,05% 0,10% 0,15% 0,20% 0,25% EF F 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 0 2 4 RED INCR T T -0,20% -0,10% 0,00% 0,10% 0,20% 0,30% 0,40% 0,50% 0,60% EF F 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 0 2 4 Reductions Increases T -0,60% -0,50% -0,40% -0,30% -0,20% -0,10% 0,00% 0,10% 0,20% 0,30% 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 INCR/GDP RED/GDP BUSINESS TAX REFORMS Based on: Federal ministry of finance; annual reports, 1964-2004. CORPORATE PROFIT TAX -0,25% -0,20% -0,15% -0,10% -0,05% 0,00% 0,05% 0,10% 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 1 3 INCR/GDP RED/GDP LOCAL TRADE TAX Figure 39: Reform patterns in income, business, consumption and property taxes 3 Excursus: Macroeconomic development in Germany 1950-2005 As background for our analysis of revenue developments (in part III and IV) and tax policy (in part V), we shortly review some stylized facts on macroeconomic development in the Federal Republic of Germany from 1950 to 2005. We focus on real growth, inflation, unemployment and the development of factor incomes and abstract largely from international developments.151 We can group the macroeconomic development of the German economy after World War Two into three major periods152 (see Figure 40): the first period from 1950 to 1973, the second from 1974 till 1990 and finally the third period from 1990 onwards. 151 More extensive discussions can be found e.g. in Giersch et al. (1994). 152 For a different classification see e.g. Muscheid (1986), Giersch et al. (1994) or Ehrlicher (1994).

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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.