The distributional effects of taxes and transfers under alternative income concepts: the importance of three ‘I’s

Publication type

Journal Article

Authors

Publication date

May 15, 2015

Summary:

This article investigates how the distribution of income changes when the standard disposable income (DI) is replaced by an extended income (EI) concept that includes the three “I”s: indirect taxes, imputed rent, and in-kind benefits. Second, it assesses the distributional effects of the main types of tax-benefit instruments under different income concepts. The analysis covers three European countries (Belgium, Greece, and the United Kingdom) characterized by substantially different tax-benefit systems. The overall redistributive effect of the tax-benefit systems depends heavily on the income concept considered and the differences across countries are smaller when considering the EI. Moreover, the common use of a narrower income concept, such as the DI, can lead to the overestimation of the redistributive effect of the cash tax-benefit instruments (in relative terms), the extent of this varying across countries, due to the size and distribution of three “I”s and the adoption of the needs-adjusted equivalence scale.

Published in

Public Finance Review

Volume and page numbers

Volume: 43 , p.347 -372

DOI

http://dx.doi.org/10.1177/1091142113506930

ISSN

10911421

Subjects

Notes

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• The distributional effects of taxes and transfers under alternative income concepts: the importance of three ‘I’s

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  2. Alari Paulus

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