THE INCOME REDISTRIBUTION EFFECT OF CHINA'S PERSONAL INCOME TAX: WHAT THE MICRO‐DATA SAY

This article uses continuous micro‐level data to investigate the income redistribution effect of the personal income tax (PIT) in China beginning in 1997. We find that the average tax rate plays a larger role in determining the income redistribution effect of PIT than tax progressivity does. Although tax progressivity decreased as a result of rising personal incomes and a constant PIT policy prior to 2005, the income redistribution effect of the PIT improved as a result of the higher average tax rate. The tax reform beginning in 2006 increased tax progressivity while decreasing the average tax rate, thereby weakening the income redistribution effect of the PIT. Further analysis indicates that the middle‐income group was the only net loser before 2005, but it benefited from the PIT policy reform. A cross‐country comparison shows that China has a lower PIT burden and higher progressivity than developed countries; in fact, China's levels of progressivity and tax burden are similar to those of Latin American countries. (JEL H24, D31, H31)     

Personal income tax progressivity and output volatility: Evidence from OECD countries

This paper investigates empirically the effect of personal income tax progressivity on output volatility using macro data from a sample of OECD countries over the period 1982–2009. Our measure of progressivity is based on the difference between the marginal and the average personal income tax rate for the average production worker. We find supportive empirical evidence for the hypothesis that higher personal income tax progressivity leads to lower output volatility. This effect comes in addition to the stabilizing impact of government size and it is equally important in economic terms. All other factors constant, countries with more progressive personal income tax systems seem to benefit from stronger automatic stabilizers.     

个人所得税的累进性与再分配效应——以湖北省为例

以湖北省城镇调查数据为分析对象,以指数为工具,本文实证考察了我国个人所得税的累进性及再分配效应。得到的结论是我国个人所得税再分配效应很弱,但其原因并不在于税收的实际累进性小,而在于个人所得税的平均税率低,税收规模很小。同时,在各类收入中,工资性收入的个人所得税累进性很强,经营性收入及财产性收入的个人所得税累进性较差,甚至出现累退性。提高个人所得税规模、加强对经营性收入及财产性收入的税收征管、以家庭为单位征收是个人所得税进一步改革的方向。     

Flat tax? Maybe not a bad idea after all

This work studies the actual degree of progressivity in the Italian tax and transfer system and examines possible reforms towards the optimum. It analyzes the distribution of personal income and effective tax rates across the Italian population, computing income and tax liabilities from survey data, and studies the optimal level of progressivity. To this end, it uses a model developed in Heathcote et al. (2017) with heterogeneous agents where skill investment and labor supply are endogenous and the government provides a public good under a balanced budget. All the main tradeoffs that shape optimal progressivity appear: the presence of inequality in initial conditions and imperfect private insurance push for positive progressivity, whereas labor supply and skill investment call for regressivity. The model suggests a drastic reduction in progressivity under both the baseline and the alternative specifications. In particular, it calls for substantial reductions in marginal tax rates above approximately 0.25 times the mean income along with increased tax rates at the lower end of the income distribution. These reforms may be approximated by a flat tax at 29% under the baseline and at 32.5% under the alternative specification, holding the required positive level of progressivity constant.     

Redistribution,inequality, and growth: new evidence

We investigate the relationship between inequality, redistribution, and growth using a recently-compiled dataset that distinguishes clearly between market (pre-tax and transfer) and net (post tax and transfer) inequality, and allows us to calculate redistributive transfers for a large number of advanced and developing countries. Across a variety of estimation methods, data samples, and robustness checks, we find: (1) lower net inequality is robustly correlated with faster and more durable growth, controlling for the level of redistribution; (2) redistribution appears benign in terms of its impact on growth, except when it is extensive; and (3) inequality seems to affect growth through human capital accumulation and fertility channels.     

Income distribution and redistribution through taxation: An international comparison

Income tax progressivity is studied with Generalized Entropy measures of inequality. Luxembourg Income Study data sets for nine countries are used for international comparison and analysis. progressivity indices are generated by using the Generalized Entropy family as well as Atkinson measures. We further our understanding by examining pre-tax and post-tax measures of inequality based respectively on gross and disposable household incomes. The decomposition property is shown to be desirable for enhancing our knowledge of income inequality and the redistributive effect of income taxes. Thus decomposition based on family size and number of earners is conducted. We learn that countries vary in their emphasis regarding redistributive effects of income taxes.     

Efficient Migration and Income Tax Competition

This paper examines the consequence of the brain drain for the income tax systems of the source and destination countries for the migration, if the two countries' policies are set noncooperatively by self–interested voters. It is assumed that the brain drain does increase the value of world output: workers with the highest income–earning ability are assumed to be more productive in one country than in another. There are costs to migration of these high–ability workers, costs that are less than the gain in the value of their production. However, for lower–ability workers, the gains in production in moving from the low–productivity country to the high–productivity country are assumed to be less than the migration costs. Voters in the high–productivity country want to capture rents from migrants. These voters are aware of the influence their tax policy has on people's migration decisions. Voters in the low–productivity country also behave strategically. I solve for the Nash equilibrium income tax rates. Increased mobility of highly skilled workers cannot decrease, and may increase, progressivity in the income tax system of the destination country, if migration actually occurs. Finally, the effects of transfers between countries on their income tax systems are examined. Redistribution between countries tends to lead to less redistribution within countries. If transfers between countries are set by a vote of all residents of both countries, then the transfer chosen will be the one that leads to the least progressive tax possible being chosen in each country.     

Understanding Changes in the Distribution and Redistribution of Income: A Unifying Decomposition Framework

In recent decades income inequality has increased in many developed countries but the role of tax and transfer reforms is often poorly understood. We propose a new method allowing for the decomposition of historical changes in income distribution and redistribution measures into: (i) the immediate effect of tax‐transfer policy reforms in the absence of behavioral responses; (ii) the effect of labor supply responses induced by these reforms; and (iii) a third component allowing us to explore the effect of changes in the distribution of a wide range of determinants, including the effect of employment changes not induced by policy reforms. The application of the decomposition to Australia reveals that the direct effect of tax‐transfer policy reforms accounts for half of the observed increase in income inequality between 1999 and 2008, while the increased dispersion of wages and capital incomes also played an important role.     

Optimal Categorical Transfer Payments: The Welfare Economics of Limited Lump-Sum Redistribution

Despite their importance in tax-transfer systems, categorical transfer payments, based on (nearly) exogenous characteristics such as disability or date of birth, have been deemphasized in optimal-tax analysis. I use the well-developed theory of first-best redistribution to clarify the welfare economics of categorical transfers, which are a form of limited lump-sum redistribution. The comparison to first-best redistribution explains how categorical transfers affect groups' labor supplies and utility levels, why the use of categorical transfers is inversely related to the planner's inequality aversion, and why their use reduces the optimal income tax rate.     

TAXES AND ENTREPRENEURSHIP IN OECD COUNTRIES

I examine how taxes and tax progressivity affect two different types of entrepreneurship—established business ownership and nascent entrepreneurship—in a large group of Organization for Economic Co‐operation and Development countries, using 2000–2009 macro‐level Global Entrepreneurship Monitor data. Empirical evidence from Arellano‐Bond generalized method of moments estimation suggests that higher tax progressivity exerts a negative influence on nascent enterprises but appears to have no impact on established business ownership. Changes in marginal and average tax rates are found to have no significant influence on either type of entrepreneurship. The most important contribution of the article is the comparison of tax impacts on actual and nascent entrepreneurship rates. (JEL H24, H29, M13, M19)     

THE VANISHING BEQUEST TAX: THE COMPARATIVE EVOLUTION OF BEQUEST TAXATION IN HISTORICAL PERSPECTIVE

Bequest tax revenues have been declining in OECD countries for at least 70 years. We propose an explanation that is based on a dynamic politico‐economic model where the evolution of bequest taxation is determined by wealth inequality. Since economic development induces a growing role of labor income and thus a reduction of wealth inequality, bequest taxation is reduced over time. The model also embeds a process of structural reallocation from agriculture to manufacturing and a consequent shift of the tax base from easy‐to‐tax land to hard‐to‐tax capital. This process implies a lower tax level and slower equalization‐induced tax reduction, the higher is the tax avoidance rate and the less developed is the economy. The introduction of franchise restrictions which are gradually lifted over time allows the hump‐shaped long‐term evolution of bequest taxation to be reproduced starting from the nineteenth century for those countries that are now modern industrial democracies. The evolution of political institutions also helps to explain the discrepancies currently observed between tax systems in developed and underdeveloped countries.     

2011年个人所得税改革的收入再分配效应

本文考察2011年9月1日实施的个人所得税改革的收入再分配效应。根据目前我国分项课征的个人所得税征管模式,本文推导出税收的收入再分配效应指数按收入构成的分解方法。根据该分解方法的主要分析结果可概括为两点:其一,平均税率的高低是个税收入分配效应大小的主要决定因素,累进性则是次要的。由于平均税率的降低,本次税收改革弱化了本来就十分微弱的个人所得税的收入分配效应。其二,我国个人所得税整体累进性指数随工资薪金所得费用扣除的提高呈倒U型。十分巧合的是,本次改革确定的3500元免征额正好处于倒U型的最大值,超过3500元的费用扣除反而会削弱我国个税的累进性。     

Inequality aversion in post-communist countries in the years of the crisis

This article provides estimates for the parameters of inequality aversion for 10 post-communist economies of central and eastern Europe in the years of the crisis. To this aim, we employ the information on the level of tax progressivity available in the European Union Survey on Income and Living Conditions cross-sectional microdata, under the assumption that the principle of equal sacrifice drives the choices of governments on marginal tax rates. Results reveal a remarkable variety of preferences for redistribution across the countries during the time period considered (2008–2012), with some of them converging towards the generally higher inequality aversion levels of the western European Union, perhaps as a result of policy responses to the crisis.     

Tax Competition and the Distribution of Income*

In this paper, we provide a two-country, two-class model of asymmetric capital tax competition. We show formally that poor people living in small countries can benefit from capital tax competition and therefore they are in favor of it. In order to benefit from capital inflow from larger countries, poor people in smaller countries accept less within-country income redistribution. As a consequence, between-country income inequality is increased by tax competition.     

PROGRESSIVITY AND REDISTRIBUTION IN NON‐REVENUE NEUTRAL TAX REFORMS: THE LEVEL AND DISTANCE EFFECTS

Kakwani and Reynolds–Smolensky indices are used in the literature to measure the progressivity and redistributive capacity of taxes. These indices may, however, show some limits when used to make normative assessments about non‐revenue neutral tax reforms. Two approaches have traditionally been taken to overcome this problem. The first of these consists of comparing after‐tax income distributions through generalized Lorenz (concentration) curves. The second approach is based on the decomposition of changes in the Reynolds–Smolensky index into changes in the average tax rate and variations in progressivity. Nonetheless, this decomposition between the average tax rate and progressivity may be further exploited to obtain some information that can be relevant to assess tax reforms. The main aim of this study is to draw up some indicators that can be useful to quantify the effects of non‐revenue neutral tax reforms. These indicators are used to investigate the last personal income tax reforms that have taken place in Spain.     

我国居民收入不平等的主要原因：市场还是政府政策？

市场因素和政府收入再分配政策是决定一国居民收入不平等程度的两个重要因素。本文采用中国家庭收入调查（China Household Income Project ,CHIP）住户数据,计算出我国居民市场收入基尼系数与可支配收入基尼系数,并同发达国家进行比较,借此探讨目前我国居民收入不平等是由市场力量造成的,还是政府收入再分配政策力度不足的结果。研究发现,从市场收入基尼系数来看,我国与发达国家之间的差距并不大。由此认为,政府收入再分配政策效果不明显是导致我国居民收入分配不平等状况较发达国家严重的主要原因。加大转移支付等再分配政策力度是缓解和改善目前我国居民收入不平等的主要途径。     

EFFECTS OF PERSONAL INCOME TAX ON INCOME DISTRIBUTION: EXAMPLE FROM BULGARIA

This study utilizes the 1992 Bulgarian household budget survey to analyze the distribution of income and income tax burden. Results indicate that the country is characterized by low income inequality, though this is changing rapidly. The findings also show that the present income tax system is progressive and that the urban sector pays much more relative to its income. Despite a steeply graduated statutory tax rate schedule, effective progression is rather modest, indicating significant tax evasion. However, one must view the results of progressivity and urban bias cautiously. As in-kind income becomes monetized and as the economy becomes more market-oriented, both progressivity and urban/rural differences will wane over time.     

Optimal tax progressivity in unionised labour markets: What are the driving forces?

In labour markets with collective wage bargaining higher progressivity of the labour income tax creates a trade-off. On the one hand, wages are lowered and unemployment decreases, on the other hand, the individual labour supply decision is distorted at the hours-of-work margin. The optimal level of tax progressivity within this trade-off is determined using a numerical general equilibrium model with imperfect competition on the goods market, collective wage bargaining and a labour-supply module calibrated to empirically plausible elasticity values. The model is calibrated to macroeconomic and institutional parameters of both the OECD average and a number of individual OECD countries. In most cases the optimal degree of tax progressivity is below the actual level. A decomposition approach shows that the optimal level is increased by high unemployment and by the general tax level.     

Income Taxation and the Diversity of Consumer Goods: A Political Economy Approach*

After‐tax income inequality has risen since the mid‐1990s, as increases in market income inequality have not been offset by greater fiscal redistribution. We argue that the substantial increase in the diversity of consumer goods has mitigated mounting political pressures for redistribution. Within a probabilistic voting framework, we demonstrate that if the share of diversified goods in the consumption bundle increases sufficiently with income, then an increase in goods diversity can reduce the political equilibrium tax rate. Focusing on OECD countries, we find empirical support for both the model's micro‐political foundations and the implied relation between goods diversity and fiscal policy outcomes.     

ASSESSING THE PERFORMANCE OF AN INCOME TAX

The paper proposes an indicator of the performance of a tax and benefit system in generating a high level of social welfare. Under standard assumptions on the form of the admissible social welfare functions, the indicator is shown to be increasing in the progressivity of the system. Using UK household data for 1985, the paper asks (i) What can the performance of a tax system with constant residual progression be? (ii) Relative to a proportional system, what is the performance of existing or proposed tax and benefit systems? (iii) How can we estimate the average residual progression of unevenly progressive tax and benefit systems?