ABSTRACT
An assessment of capital income taxation in Germany has to focus first on the tax burden borne by the taxpayer. In an income tax system, the cash flow is a neutral tax base if and only if depreciation and pension reserves, financing payments, costs of capital reinvestments and personal consumption have been excluded. The nominal tax rate for profits distributed to domestic stockholders equals the business profits tax rate for the corporation plus the personal marginal income tax rate plus loss of interest because of the imputation system. Proposals to reform capital income taxation have to take into account our restricted knowledge concerning the nominal tax burden caused by capital income taxation and our lack of knowledge concerning the effective incidence. In order to discuss taxes from an efficiency point of view, one needs a reference system, which can never be a complete description of the real world and a reference point at the same time.
