German Income Tax Policy Between Equity and Efficiency

Abstract

Equity and efficiency are usually regarded as the main objectives of tax policy. Commenting on Dr. Reginald Hansen's doctoral dissertation, the author analyses the meaning of the equity-efficiency trade-off framework in the context of the ongoing debate regarding the reform of the German income-tax system. Schmoller's and Wagner's contrasting conceptions of income taxation are discussed. The role of the tax law as an instrument of interventionism within the framework of the “social market economy”, especially through the use of tax incentives, is highlighted. Contrary to Dr. Hansen, the author adopts an “Austrian” viewpoint and argues that both the (catallactic) efficiency and equity of tax incentives are disputable, especially but not uniquely through their (ab)use in tax shelter constructions.