Skimming the achieved? Quantifying the fiscal incentives of the German fiscal equalization scheme and its reforms since 1970

Arbeitspapier

Marginal rates of contribution (MRC), i.e., the rates at which additional revenues are skimmed via larger contributions or lower transfer receipts, quantify the incentives of a fiscal equalization scheme. The present paper is the first to calculate the marginal rates of contribution for the Laender (states) in the German fiscal equalization scheme for each of the 50 years since its establishment in 1970 and over five major reforms, taking into account all relevant revenues. Our results show that MRC have been at a consistently high level. Until 2019 the scheme induced an almost full skimming of additional tax revenues of recipient states. With the system's latest reform in 2020, MRC did increase further. Recipient states now face an over-skimming of additional tax revenues and thus, massive fiscal disincentives to maintain their own tax base. While these findings have been widely expected, comprehensive evidence has been missing so far.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Freiburger Diskussionspapiere zur Ordnungsökonomik ; No. 21/4

Classification and Topics

• Classification: Wirtschaft ; State and Local Taxation, Subsidies, and Revenue ; State and Local Government; Intergovernmental Relations: Interjurisdictional Differentials and Their Effects ; Intergovernmental Relations; Federalism; Secession ; Structure, Scope, and Performance of Government
• Subject: Fiscal equalization ; Marginal contribution rates ; Constitutional reform

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bury, Yannick ; Feld, Lars P. ; Burret, Heiko Tobias
• Event: Veröffentlichung
• (who): Albert-Ludwigs-Universität Freiburg, Institut für Allgemeine Wirtschaftsforschung, Abteilung für Wirtschaftspolitik und Ordnungsökonomik
• (where): Freiburg i. Br.
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/232066
• Last update: 10.03.2025, 11:42 AM CET