The rise and likely fall of the German income tax, 1958-2005

Data from official statistics and tax laws are exploited to describe fifty years of income taxation in Germany, with a focus on its role as a fiscal and distributive tool. The temporal pattern that emerges from the data is one of a golden age of the German income tax, followed by a slow shift towards a major crisis. The turning point on the income-tax path seems to have occurred in 1986. I put forward the thesis that this downturn was the outcome of a long-term change in the balance of political power. That change is probably rooted in structural breaks that occurred in the German economy during the 1970s and early 1980s.