The impact of redistribution through taxes and deductions on the income distribution - A decomposition analysis with administrative tax data from Switzerland

Hümbelin, Oliver; Farys, Rudolf (2019). The impact of redistribution through taxes and deductions on the income distribution - A decomposition analysis with administrative tax data from Switzerland In: 62nd ISI Wolrd Statistics Congress. Bern: Berner Fachhochschule BFH, Soziale Arbeit

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This study shows the potential of administrative data to grant us a more complete picture of the redistributive effects of the visible (tax rates) and hidden (tax deductions) instruments of the fiscal welfare state. Based on administrative tax data from a large Swiss canton, we apply a gini-based redistributive effect decomposition to demonstrate how several taxes and deductions impact the post-tax income distribution. We show that tax deductions drastically reduce the redistributive effect of taxes because lump sum deductions in a progressive tax system lead to greater tax relief for higher income earners. Moreover, high income earners have additional options to claim deductions such as real-estate expenses or extra-mandatory payments to the pension scheme. Comparison over time furthermore shows that the role of deductions for real-estate expenses decreased. All in all, because deductions reduce the redistributive effect of taxes, they lead to higher post tax income inequality compared to a hypothetical system without deductions. The redistributive effect of the tax system should therefore be studied, not only with respect to tax rates, but also with respect to deductions.

Item Type:	Conference or Workshop Item (Speech)
Division/Institute:	School of Social Work > Social Security focus area School of Social Work BFH Centres and strategic thematic fields > BFH Centre for Social Security School of Social Work > Institute for Social Security and Social Policy
Name:	Hümbelin, Oliver0000-0002-8983-9958 and Farys, Rudolf
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HA Statistics H Social Sciences > HG Finance H Social Sciences > HM Sociology
Publisher:	Berner Fachhochschule BFH, Soziale Arbeit
Language:	English
Submitter:	Oliver Hümbelin
Date Deposited:	13 Jan 2020 06:19
Last Modified:	16 Jun 2022 21:45
Related URLs:	Organisation
Uncontrolled Keywords:	Inquality, Taxes, Redistribution, Deductions, Switzerland, Fiscal Welfare, Hidden Welfare
ARBOR DOI:	10.24451/arbor.9883
URI:	https://arbor.bfh.ch/id/eprint/9883