Distributional Effects of Selected Tax Policy Reforms during the 19th Legislative Period

Tasks

This study examines the distributional effects of tax policy during the 19th legislative period. The ifo microsimulation model ifo-MSM-TTL simulates the changes in income for different household types and income groups as well as the change in inequality and poverty measures due to reforms in tax legislation. The study focuses on the key tax policy, including the partial abolition of the solidarity surcharge, adjustments to the income tax schedule, the increase in the child allowance, the child benefit and the allowance for single parents, as well as adjustments to the disability allowance.

Methods

Ifo Microsimulation Model ifo-MSM-TTL

Data and other sources

Socio-Economic Panel (SOEP) from 2018 (v35).

Results

In nominal terms, the tax policy reforms relieved the burden on many private households. With the exception of the reduction of the solidarity surcharge, most of the implemented tax policy measures are in line with regular adjustments to real income trends. The distributional effects induce a slight reduction in the inequality measures.