EconStor >
Technische Universität Dresden >
Fakultät Wirtschaftswissenschaften, Technische Universität Dresden >
Dresden Discussion Paper Series in Economics, Faculty of Business and Economics, TU Dresden >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/48161
  
Title:Income tax deduction of commuting expenses and tax funding in an urban CGE study: the case of German cities PDF Logo
Authors:Hirte, Georg
Tscharaktschiew, Stefan
Issue Date:2011
Series/Report no.:Dresden discussion paper series in economics 02/11
Abstract:Germany like many other European countries subsidize commuting by granting the right to deduct commuting expenses from the income tax base. This regulation has often been changed and has regularly been under debate during the last decades. The pros (e.g. causing efficiency gains with respect to the spatial allocation of labor) and cons (e.g. causing urban sprawl) are well documented. Nonetheless, there is need for further research. For reasons of tractability the few models applied in the tax deduction related literature are based on restrictive assumptions particularly concerning the design of the income taxation scheme and the structure of households (neglecting household heterogeneity) and, most importantly, they do not integrate labor supply and location decision problems simultaneously. Here, for the first time, those and more features are taken into account in a full spatial general equilibrium simulation approach calibrated to an average German city. This model is applied to calculate the impacts of tax deductions on an urban economy thereby considering different funding schemes. Our results suggest that the tax deduction level currently chosen is below the optimal level in the case of income tax funding. If a change in the tax base occurs, e.g. toward consumption tax or energy tax funding, the optimal size of the subsidy should be even higher. Furthermore, the different policy packages cause a very differentiated pattern regarding welfare distribution, environmental (CO2 emissions) and congestion effects. We also find surprisingly small effects on urban sprawl characterized by suburbanization of residences and jobs, increasing commuting distances and spatial city growth.
Subjects:urban general equilibrium model
commuting subsidies
income tax deduction
JEL:C68
R12
R13
R14
R20
R51
Document Type:Working Paper
Appears in Collections:Dresden Discussion Paper Series in Economics, Faculty of Business and Economics, TU Dresden

Files in This Item:
File Description SizeFormat
664126367.pdf1.08 MBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/48161

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.