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Introducing Family Tax Splitting in Germany: How Would It Affect the Income Distribution, Work Incentives, and Household Welfare?

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  • Viktor Steiner
  • Katharina Wrohlich

Abstract

We analyze the effects of three different proposals to introduce a family tax-splitting system in Germany. The empirical analysis is based on a behavioral microsimulation model, which integrates an empirical household labor-supply model into a detailed tax-benefit model. Our results show that, under each reform, the lion's share of the reduction in taxes would accrue to families in the upper part of the income distribution, and that labor-supply effects are small. If budgetary balance were financed by a reduction of the child benefit, our results suggest that none of the reforms would be welfare-improving.

Suggested Citation

  • Viktor Steiner & Katharina Wrohlich, 2008. "Introducing Family Tax Splitting in Germany: How Would It Affect the Income Distribution, Work Incentives, and Household Welfare?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 64(1), pages 115-142, March.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200803)64:1_115:iftsig_2.0.tx_2-w
    DOI: 10.1628/001522108X312096
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    More about this item

    Keywords

    Household taxation; income distribution; work incentives; microsimulation;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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