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Taxation and the Worlds of Welfare

Author

Listed:
  • Yingying Deng
  • Monica Prasad

Abstract

We use Luxembourg Income Study data to compare the progressivity of the tax structure in the U.S. and Europe. While our study supports the arguments of other scholars that the US has more progressive taxes than the continental or social democratic countries, we also present the following qualifications: (1) While the US remains more progressive than other countries, since 1991 its tax structure is in fact regressive. All other countries for which it is possible to calculate overall regressivity have always been, and remain, regressive overall. (2) Britain's tax structure is as regressive as Sweden's. (3) It is a mistake to consider particular kinds of taxes (e.g. income or property) as progressive or regressive: there are examples of progressive property and payroll taxes, and regressive income taxes. And (4) the comparative pattern of progressivity is partly the result of the role of the value added tax in the European revenue structure, and the small role that sales taxes play in the U.S. We close with a discussion of whether the regressivity of the value added tax matters, and what agenda for future research our work suggests.

Suggested Citation

  • Yingying Deng & Monica Prasad, 2009. "Taxation and the Worlds of Welfare," LIS Working papers 480, LIS Cross-National Data Center in Luxembourg.
    • Handle: RePEc:lis:liswps:480
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    More about this item

    Keywords

    taxation; welfare state; capitalist systems;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • P51 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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