an article by Chrysa Leventi, Holly Sutherland and Iva Valentinova Tasseva (University of Essex, UK) published in Journal of European Social Policy Volume 29 Issue 1 (February 2019)
Abstract
This article examines how income poverty is affected by changes to the scale of tax-benefit policies and which are the most cost-effective policies in reducing poverty or limiting its increase in seven diverse EU countries.
We do that by measuring the implications of increasing/reducing the scale of each policy instrument, using microsimulation methods while holding constant the policy design and national context.
We consider commonly applied policy instruments with a direct effect on household income: child benefits, social assistance, income tax lower thresholds and a benchmark case of rescaling the whole tax-benefit system.
We find that the assessment of the most cost-effective instrument may depend on the measure of poverty used and the direction and scale of the change. Nevertheless, our results indicate that the options that reduce poverty most cost-effectively in most countries are increasing child benefits and social assistance, while reducing the former is a particularly poverty-increasing way of making budgetary cuts.
Full text (PDF 15pp)
Showing posts with label microsimulation. Show all posts
Showing posts with label microsimulation. Show all posts
Tuesday, 19 February 2019
Thursday, 30 August 2018
Who benefits from the ‘hidden welfare state’? The distributional effects of personal income tax expenditure in six countries
an article by Silvia Avram (University of Essex, UK) published in Journal of European Social Policy Volume 28 Issue 3 (July 2018)
Abstract
We use a tax-benefit microsimulation model to investigate the size and distributional effects of tax allowances and tax credits in six European countries.
Results indicate that tax allowances and tax credits benefit large sections of the population, not just individuals with high incomes and that together they amount to substantial amounts of foregone revenue. However, with some (important) exceptions, their effect on inequality is small.
Tax allowances are generally regressive while tax credits tend to be proportional or mildly progressive. Yet, the redistributive effect of tax allowances and tax credits works in complex and often unanticipated ways.
Other features of the income tax system (such as the tax rate schedule or the definition of the taxpayer unit) are as important in determining the size and direction of the redistributive effect as the characteristics of the tax allowances/tax credits themselves. Even instruments inversely linked to taxable income can be more beneficial to high-income households in some contexts.
Consequently, tax allowances and tax credits appear ill-suited to target resources towards households in the bottom part of the income distribution.
Full text (PDF 23pp)
Abstract
We use a tax-benefit microsimulation model to investigate the size and distributional effects of tax allowances and tax credits in six European countries.
Results indicate that tax allowances and tax credits benefit large sections of the population, not just individuals with high incomes and that together they amount to substantial amounts of foregone revenue. However, with some (important) exceptions, their effect on inequality is small.
Tax allowances are generally regressive while tax credits tend to be proportional or mildly progressive. Yet, the redistributive effect of tax allowances and tax credits works in complex and often unanticipated ways.
Other features of the income tax system (such as the tax rate schedule or the definition of the taxpayer unit) are as important in determining the size and direction of the redistributive effect as the characteristics of the tax allowances/tax credits themselves. Even instruments inversely linked to taxable income can be more beneficial to high-income households in some contexts.
Consequently, tax allowances and tax credits appear ill-suited to target resources towards households in the bottom part of the income distribution.
Full text (PDF 23pp)
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