MIKMOD-ESt: A static microsimulation model of personal income taxation in Germany

MIKMOD-ESt is a microsimulation model of the German personal income tax. Developed and operated on behalf of the German Federal Ministry of Finance, MIKMOD-ESt is extensively used to evaluate numerous proposals for reforms of personal income taxation in Germany. The aim of this paper is to shed light on various aspects of the model. These include information on the microdata used for simulation (source and date, differences to other data sets) as well as the method for updating and uprating the data. Based on these information, advantages in comparison to other existing tax(-benefit) models as well as limitations of the current simulation model are discussed. Advantages are, e.g. the full inclusion of all taxpayers above a certain income threshold by using official tax returns or the possibility to conduct microsimulation analyses in a very detailed manner that allows for evaluation of very small and selective reforms. The main constraints are the restriction of the database to those currently obliged to file a tax return and the lack of information necessary to model the behavioural responses to tax changes.