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Assessing income tax perturbations

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We present a scheme for analysing income tax perturbations, applied to a real Norwegian tax reform during 2016 - 2018. The framework decomposes the reform into a structural reform part and a tax level effect. The former consists of a distributional impact and a social e¢ ciency effect measured as the behavioural-induced change in tax revenue. Considering the overall welfare e¤ect conditional on inequality aversion, we back out the pivotal value of the decision makers’ inequality aversion, according to which unfavourable redistributional e¤ects exactly cancel out a social efficiency enhancement.

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  • Vidar Christiansen & Zhiyang Jia & Thor O. Thoresen, 2020. "Assessing income tax perturbations," Discussion Papers 945, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:945
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    More about this item

    Keywords

    income tax; tax reform; tax perturbation; inequality aversion;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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