Tax Policy and Income Inequality in the United States, 1979–2007

Bargain, Olivier; Dolls, Mathias; Immervoll, Herwig; Neumann, Dirk; Peichl, Andreas; Pestel, Nico; Siegloch, Sebastian

doi:10.1111/ecin.12172

Cited by 37 publications

(37 citation statements)

References 45 publications

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“…Recognizing that household net incomes are a function of the tax‐benefit rules and household socio‐economic characteristics including market incomes, they identify the contribution of each component to changes in net incomes by varying a single component in turn while keeping others fixed. Several extensions have been proposed to further separate out labor supply effects (Bargain, ; Bargain et al , ; Creedy and Hérault, ; Hérault and Azpitarte, ). In this paper, we focus on the role of policies, corresponding to a partial decomposition in the Bargain and Callan () framework, but introduce further subcomponents to distinguish between the structural effect and indexation effect.…”

Section: The Decomposition Methodsmentioning

confidence: 99%

“…Similar to previous studies (e.g. Clarke and Leicester, ; Bargain et al , ), we employ multiple benchmark indexation factors: in one scenario, α equals the change in the Consumer Price Index (CPI), and in another, it reflects growth in average market incomes, which we refer to as the Market Income Index (MII). While Bargain and Callan () make a case for the MII‐based benchmark index, this appears to follow from an economic interpretation they give to their decomposition approach rather than being strictly imposed by the method itself.…”

Section: The Benchmark Indexationmentioning

confidence: 99%

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Indexing Out of Poverty? Fiscal Drag and Benefit Erosion in Cross‐National Perspective

Paulus

Sutherland

Tasseva

2019

Review of Income and Wealth

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We assess how tax-benefit policy developments in 2001-11 affected the household income distribution in seven EU countries. We use the standard microsimulation-based decomposition method, separating further the effect of structural policy changes and the uprating of monetary parameters, which allows us to measure the extent of fiscal drag and benefit erosion in practice. The results show that despite different fiscal effects, policies overall mostly reduced poverty and inequality and both types of policy developments had sizeable effects on the income distribution. We also find that the uprating of monetary parameters not only had a positive effect on household incomes, meaning fiscal drag and benefit erosion were avoided, but generally also contributed more to poverty and inequality reduction than structural policy reforms.JEL Codes: D31, H23, I32 Toon Vanheukelom and participants at workshops (Canazei, Colchester, Seville) and conferences (ImPRovE, Antwerp; SEEK, Mannheim; EALE, Ljubljana; IMA, Maastricht). The results presented here are based on EUROMOD version F6.36. EUROMOD is maintained, developed and managed by ISER at the University of Essex, in collaboration with national teams from the EU member states. We are indebted to the many people who have contributed to the development of EUROMOD. The process of extending and updating EUROMOD

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Section: The Decomposition Methodsmentioning

confidence: 99%

Section: The Benchmark Indexationmentioning

confidence: 99%

Indexing Out of Poverty? Fiscal Drag and Benefit Erosion in Cross‐National Perspective

Paulus

Sutherland

Tasseva

2019

Review of Income and Wealth

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“…Similar and contemporaneous work to this paper includes Bargain et al (2011Bargain et al ( , 2015 who examine the effect of legislated policy changes on the post-tax distribution of income, focusing primarily on the federal tax code. This paper, however, focuses substantially more on state tax systems and state-by-state analysis.…”

Section: Related Literaturementioning

confidence: 99%

The Role of Taxes in Mitigating Income Inequality Across the U.S. States

Cooper¹,

Lutz²,

Palumbo³

2015

National Tax Journal

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This paper examines the role that federal and especially state tax policies play in mitigating income inequality. The results show that the tax code reduces income inequality considerably in all states. All of this income compression is attributable to federal taxes, as state taxes, on average, widen the after-tax income distribution slightly. Nevertheless, there is very substantial cross-state variation in the impact of state tax policies. The paper further documents that the mitigating influence of taxes on income inequality has risen since the early 1980s, with the increase at the state level due mostly to changes to the tax code.

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“…Unlike computable general equilibrium (CGE) approaches, the only assumptions we impose concern our proposed reform scenarios, or the elasticity of labor supply. Our approach is in the spirit of recent research, for instance on fiscal sustainability (Dolls et al 2017), income distribution analysis (Bargain et al 2015), or mortgage interest deductibility . Thus, we follow well-established simulation techniques using EUROMOD, allowing for inferences about the distributional and revenue effects of a tax shift from labor to property.…”

Section: The Tax-benefit Model Euromodmentioning

confidence: 99%

Distributional and revenue effects of a tax shift from labor to property

Paetzold

Tiefenbacher

2018

Int Tax Public Finance

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Contrary to frequent recommendations of the public finance literature and international institutions, a persistently high tax wedge on labor is observed in Europe. Simultaneously, the scope for shifting taxes to more growth-friendly revenue sources appears underused. This motivates our simulation of a tax shift from labor to property for Germany, a country where property tax revenues are particularly low and the tax wedge on labor income is among the highest in industrialized countries. We simulate a reform where property is no longer taxed by its (often) outdated cadastral value but by its market value, using the additional revenue to reduce social insurance contributions (SIC). To make such a simulation possible, we match property-related information with the input data of the tax-benefit microsimulation model EUROMOD. We find a considerable increase in property tax revenues, allowing to reduce the implicit tax rate on labor from 37.2 to 36.5%. Distributive effects tend to be modest and depend on the design of the SIC reduction. Overall, our results suggest that more households would gain than lose from the tax shift, with gainers mostly situated in the middle of the income distribution.

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Tax Policy and Income Inequality in the United States, 1979–2007

Cited by 37 publications

References 45 publications

Indexing Out of Poverty? Fiscal Drag and Benefit Erosion in Cross‐National Perspective

Indexing Out of Poverty? Fiscal Drag and Benefit Erosion in Cross‐National Perspective

The Role of Taxes in Mitigating Income Inequality Across the U.S. States

Distributional and revenue effects of a tax shift from labor to property

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