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Impact Of Tax, Transfer, And Expenditure Policies Of Government On The Distribution Of Personal Income In Canada

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  • David A. Dodge

Abstract

This is a study of the first order incidence of government taxation and expenditure policies on the incomes of families and unattached individuals in Canada in 1970. The specific purposes of the study are twofold. The first is to estimate for calendar year 1970 the first order incidence of governments’actual tax, transfer, and expenditure policies on spending units. The second objective is to simulate the changes in this incidence that would have occurred in 1970 if the new federal personal income tax, unemployment insurance, old age sccurity and family allowance programs had been in operation during that year. The methodology is similar to that used by W. Irwin Gillespie in his pioneering 1964 study for the Royal Commission on Taxation. It is concluded that the 1970 incidence of the combined tax and transfer programs of all levels of government is broadly redistributive, with net incidence of federal government programs being considerably more redistributive than that of provincial and local governments. In general, the public sector provides large net benefits to families and individuals with incomes of less than $4,000, declining net benefits to families earning from $4,000 to $11,000 and levies small but increasing levels of net tax on families and individuals with incomes in excess of $11,000. This general conclusion is relatively insensitive to the precise assumptions made about the shifting of taxes and the distribution of expenditures on pure public goods. From simulation experiments, recent reforms of the federal income tax, unemployment insurance, old age security and family allowance systems were estimated to increase the amount of redistribution from the rich to the poor.

Suggested Citation

  • David A. Dodge, 1975. "Impact Of Tax, Transfer, And Expenditure Policies Of Government On The Distribution Of Personal Income In Canada," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 21(1), pages 1-52, March.
  • Handle: RePEc:bla:revinw:v:21:y:1975:i:1:p:1-52
    DOI: 10.1111/j.1475-4991.1975.tb00704.x
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    Cited by:

    1. Payette, Micheline & Vaillancourt, François, 1986. "L’incidence des recettes et dépenses gouvernementales au Québec en 1981," L'Actualité Economique, Société Canadienne de Science Economique, vol. 62(3), pages 409-441, septembre.
    2. Kaplow, Louis, 2006. "Public goods and the distribution of income," European Economic Review, Elsevier, vol. 50(7), pages 1627-1660, October.
    3. Johan Fritzell, 2000. "Still Different? Income Distribution in the Nordic Countries in a European Comparison," LIS Working papers 238, LIS Cross-National Data Center in Luxembourg.
    4. Pommerehne, Werner W., 1976. "Quantitative aspects of federalism: A study of six countries," Discussion Papers, Series I 74, University of Konstanz, Department of Economics.
    5. Filip Palda, 1997. "Fiscal Churning and Political Efficiency," Kyklos, Wiley Blackwell, vol. 50(2), pages 189-206, May.
    6. Hines Jr., James R., 2000. "What is benefit taxation?," Journal of Public Economics, Elsevier, vol. 75(3), pages 483-492, March.
    7. Filip Palda, 2005. "Why Do Voters Demand Universal Government Benefits?," Public Economics 0503009, University Library of Munich, Germany.
    8. Nanak Kakwani, 1983. "Progressivity Index of Sales Tax on Individual Expenditure Items in Australia," The Economic Record, The Economic Society of Australia, vol. 59(1), pages 61-79, March.
    9. Cormac O'Dea & Ian Preston, 2012. "The distributional impact of public spending in the UK," IFS Working Papers W12/06, Institute for Fiscal Studies.
    10. G.C. Ruggeri, 1978. "On the Incidence of Canada's Provincial Sales Taxation," Public Finance Review, , vol. 6(4), pages 473-484, October.

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