Good tax policy fundamentally depends on knowledge about the effects of taxation on prices and economic behavior of individuals and firms. For example, income taxes only serve their purpose if they do not yield a massive reduction in labor supply, and corporate taxes are only redistributive if they are not fully shifted to workers by means of lower wages. This project explores the behavioral and price effects of taxes in different contexts using newly available high-quality data from Germany combined with quasi-experimental evidence based on recent tax reforms. In a first part of the project, the incidence of property taxes is examined. It is intended to provide empirical estimates of the incidence of property taxes by studying the question of which share of residential property taxes is borne by landlords and which share is shifted onto tenants. Empirical identification uses the specific institutional setting of property taxation in German municipalities. In a second project, the German Elasticity of Taxable Income (ETI) is estimated. This measure is a key parameter for understanding the welfare effects of income taxation and there is only little empirical evidence for Germany. The study uses administrative tax return data and exploits several tax reforms in Germany over the last decade. Having explored property and income taxes, a third part of the project studies the price incidence of Value-added taxes. The paper studies how consumption prices were affected by a large and salient increase of VAT taxes in Germany. The empirical analysis uses a difference-in-differences design combined with administrative firm-level data.
01.06.2014 - 01.06.2015