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The distribution of the tax burden and the income distribution: theory and empirical evidence

Author

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  • Corrado Benassi

    (University of Bologna)

  • Emanuela Randon

    (University of Bologna)

Abstract

We compare the tax burden distribution across incomes and the income share distribution, based on a stochastic dominance approach. We find conditions to assess the progressivity of different sources of taxes, given knowledge of the income share elasticities, which measure the relative marginal change in the income share accruing to each class of income, associated to a marginal increase in income. We first consider a simple setting with only indirect taxes and then extend it to savings and direct taxation. The progressivity of a given set of taxes depends on the correlation between the relative incidence of the different sources of taxation and the income elasticity of household net expenditure. We use this approach to test empirically for the progressivity of the fiscal system.

Suggested Citation

  • Corrado Benassi & Emanuela Randon, 2021. "The distribution of the tax burden and the income distribution: theory and empirical evidence," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(3), pages 1087-1108, October.
    • Handle: RePEc:spr:epolit:v:38:y:2021:i:3:d:10.1007_s40888-020-00207-3
    DOI: 10.1007/s40888-020-00207-3
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    References listed on IDEAS

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    Cited by:

    1. Cristina Cirillo & Lucia Imperioli & Marco Manzo, 2021. "The Value Added Tax Simulation Model: VATSIM-DF (II)," Working Papers wp2021-12, Ministry of Economy and Finance, Department of Finance.

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    More about this item

    Keywords

    Redistributive effects; Taxation; Income distribution; Stochastic dominance; Kolmogorov–Smirnov test;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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