Capital income taxation is a complicated issue because of the g- eral equilibrium implications
these taxes have with regard to the int- sectoral and intertemporal allocation of economic
resources. Together with Michael Stimmelmayr (CES Munich) and Christian Keuschnigg (IFF St.
Gallen) Doina Radulescu from the Ifo Institute for E- nomic Research has designed a complex
and particularly elegant - tertemporal general equilibrium model of the economy called IfoMod.
IfoMod makes it possible to calculate the welfare gains and losses from fundamental tax reforms
in present value terms. One of the tax reforms Doina Radulescu analyses is the move - wards a
dual income tax as is used in some Scandinavian countries. She analyses this tax using German
data because it was recently p- posed among others by the German Council of Economic
Advisors. In the meantime IfoMod has become a standard tool for the Ifo Institute. According
to the Council of Economic Advisors it is not only sta- of-the-art but one of the world s
most developed and advanced CGE models for the purpose of analysing intertemporal allocation
problems in growing economies. Hans-Werner Sinn Preface This book was written during my time
acting as a PhD candidate in the Public Finance Department at the Ifo Institute for Economic
Research in Munich.
