Clemens Fuest

Is a Flat Tax Politically Feasible in a Grown-Up Welfare State?

The introduction of a flat tax is supposed to have several advantages. Administration and compliance costs are reduced, as well as incentives for tax evasion. Furthermore, positive employment and growth effects are expected. Despite these advantages, a flat rate tax is not very popular in most Western European countries. The most important objection against a flat tax states that a flat rate tax would be inequitable and unfair. The present paper uses a simulation model based on a unique database of German micro data to provide empirical evidence for the analysis of the equity and efficiency effects as indicators for the political feasibility of flat rate tax reforms. Our analysis shows that the selection of the schedule and tax base parameters are crucial for the effects of flat tax reforms in terms of equity and efficiency. A flat rate tax with a higher basic allowance and a higher single rate has less harmful distributional effects than a flat rate tax with low basic allowance and tax rate. Nevertheless, the scenario with the lowest parameter values for basic allowance and tax rate is the only alternative that leads to positive labour supply and significantly positive welfare effects. Both labour supply and static welfare effects, however, are quite small. Although we have derived our results for the case of Germany, we do think that similar patterns would be observed in other countries of Western Europe. If this proves to be correct, it will be hard for flat tax reforms to invade the grown-up welfare states of Old Europe.

Taugt Neutralität als Leitlinie der Steuerpolitik

Fur Okonomen, die sich mit Steuern beschaftigen, besteht kein Zweifel daran, dass das Konzept der Neutralitat der Besteuerung fundamentale Bedeutung fur die Steuerpolitik hat. Es ist typisch fur Debatten uber Steuerpolitik und Steuerreformen, dass Okonomen das bestehende Steuersystem oder Reformplane daran messen, ob die Neutralitat der Besteuerung verletzt wird.

Ökonomische Aspekte der Staatsentschuldung

In den letzten vier Jahrzehnten hat die Staatsverschuldung in den meisten Industriestaaten deutlich zugenommen. Uber viele Jahre hinweg war diese Entwicklung schleichend, immer wieder traten Phasen konstanter oder sogar sinkender Verschuldungsquoten auf. Diese Phasen waren allerdings meistens zu kurz, um den allgemeinen Trend zu wachsender Verschuldung umzudrehen. Zwischen 1975 und 2008 stieg die Staatsverschuldungsquote der G7 Lander (also der fuhrenden Volkswirtschaften) durchschnittlich von ca. 40 % auf uber 90 % des Bruttosozialproduktes an. Im Laufe der weltweiten Wirtschaftskrise, die 2008 ausbrach, hat der Anstieg der Staatsverschuldung sich dramatisch beschleunigt. Das lag zum einen an rezessionsbedingt sinkenden Steuereinnahmen und wachsenden Aufwendungen fur Arbeitslosenunterstutzung und andere Sozialleistungen, zum anderen an sehr hohen staatlichen Ausgaben fur das Auffangen von Banken und fur Konjunkturpakete.

Basic Income vs. Wage Subsidy: Labour Supply, Fiscal Effects, and Differences in Recipients

The economic literature often argues that basic income schemes and low wage subsidies to employees are just special cases of a negative income tax. In this debate, it is ignored that these concepts target different population subgroups. This paper investigates the different target groups and the particular implications on government budget and labour supply. A basic income scheme doubles the number of net benefit receiving persons whereas a more targeted wage subsidy increases this number by only 10%. These differences explain why wage subsidy programs can be financed and evoke politive labour supply effects, while basic income schemes either lead to high costs or to negative employment effects.