Redistribution over the lifetime in the Irish tax-benefit system: an application of a prototype dynamic microsimulation model for Ireland
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This paper examines the distribution of lifetime income in Ireland. To do this a new prototype dynamic microsimulation model for Ireland is used to generate lifetime income streams. Aggregating over the lifetime we can assess the distribution of lifetime income and the degree of redistribution in the tax-benefit system. In addition to the effect of taxes and benefits, we decompose lifetime income into its components and examine the impact of different life-cycle patterns.Keywords:
Redistribution
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In this paper we utilise microsimulation techniques in the form of an income generation model and a tax/benefit model to estimate both the fiscal and net private return to education at a marginal level. This is carried out empirically using Irish data across the period 1987-2005 and is the first study to utilise these techniques in such a manner. The results indicate that a more generous tax/benefit system, combined with a greater state burden of the cost of education over this period may have helped increase the individualﾒs return to education, while reducing the state return from investing in education. The methodology employed allows us to specifically analyse the impact of various components of the tax/benefit system upon these returns across time and show the role of income tax changes upon the return to education for the individual and the state.
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This paper investigates how social security redistributes lifetime income within the same generation in Japan, based on data from the Survey on the Redistribution of Income. The progressivity of Japan's public pension program appears to be much more limited on a lifetime basis than on an annual basis. Given an aging population, replacing the current pay-as-you-go system with a simple one that consists of a flat benefit and a wage-proportional premium, and has no maximum contribution, can be desirable in terms of both efficiency and intragenerational equity. The redistributive effects of income tax and consumption tax to finance the benefit are also examined.
Redistribution
Equity
Consumption
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The aim of this paper is to explore the redistributive effects of taxes and benefits in Ecuador using two different approaches: direct use of reported taxes and benefits in household survey data, and use of simulated taxes and benefits obtained from ECUAMOD, the tax-benefit microsimulation model for Ecuador. Our results show that simulated taxes and social insurance contributions capture better the number of taxpayers and aggregate revenue amounts from official statistics than information taken directly from the data. Moreover, using reported data on taxes and social insurance contributions underestimates their redistributive effect in comparison with simulated policies. We discuss factors behind the differences between the two approaches and conclude with a discussion of the advantages offered by microsimulation for policy analysis.
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MicroReg is a tax-benefit microsimulation model, developed by IRPET (Regional Institute for Economic Planning in Tuscany), able to simulate the main fiscal policies for all the Italian Regions. The model is based on the EUROSTAT Survey on Income and Living Conditions (EU-SILC). In its traditional version MicroReg can simulate direct taxes and in-cash transfers, but recently it was extended in two directions. The first extension aims at adding indirect taxes to simulated tax policies, thanks to a statistical matching between EU-SILC and the Italian Household Budget Survey by Istat(National Institute of Statistics (Italy)). To improve the matching, an estimation of the level of expenditure for each EU-SILC household is added to the variables on which the matching is conditioned, by applying the relation between consumption and income estimated on the Bank of Italy Survey of Households Income and Wealth. The second extension aims at including in-kind transfers, in health and education and in household disposable income. The monetary value of in-kind transfers is estimated with the public cost of production by using national and regional administrative data. The allocation of benefits among individuals is done by following the so called actual consumption approach, both for health and education. This paper describes MicroReg, focusing on the new extensions, and the results of an application to assess the distributive effects of fiscal policies introduced in the last few years in Italy, both on the revenue and on the expenditure side.
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This paper uses data from individual income tax returns to explore the redistributive effect of personal income tax in Ecuador between 2007 and 2011. Following common practice in tax incidence analysis, we first compute indices of income tax progressivity and redistributive impact. We then mobilize microsimulation techniques to simulate the redistributive effect of personal income tax under different taxable income scenarios. Finally, we calculate the effective tax rates paid by top income groups and derive a range of optimal income taxes for the top 1% income group. We obtain two main empirical results. First, although Ecuador’s personal income tax is highly progressive, its redistributive capacity is low: our findings show that high-income individuals are more likely to reduce their taxable income through legal tax deductions than low-income individuals. Second, while the effective tax rates paid by high-income individuals are relatively low, optimal tax rates could be as high as 63%.
Taxable income
Adjusted gross income
Write-off
Dividend tax
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During the last two decades a growing interest in understanding what determines the redistributive role of tax-benefit systems has been recorded worldwide. For the case of Italy, the previous analyses were mainly focused on quantifying the contribution of marginal tax rates, deductions and tax credits to the redistributive capacity of PIT, neglecting the effect on income redistribution of proportional taxes and income sources exempt from taxation such as tax-free cash benefits. The following paper aims to fill this gap by applying two alternative Gini-based decomposition methodologies (Onrubia et al., 2014; Urban, 2014) to the Italian tax-benefit systems redistributive power over the period 2005-2018. The contribution of each tax-benefit instrument is quantified for several baseline policy scenarios which diverge from each other for being representative of different degrees of extension of the tax-benefit system under study.
Redistribution
Progressive tax
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In this paper, we assess the distributional impact of introducing a carbon tax in Poland. We apply a two-step simulation procedure. First, we evaluate the economy-wide effects with a dynamic general equilibrium model. Second, we use a microsimulation model based on household budget survey data to assess the effects on various income groups and on inequality. We introduce a new adjustment channel related to employment changes, which is qualitatively different from price and behavioural effects, and is quantitatively important. We nd that the overall distributional effect of a carbon tax is largely driven by how the revenue is spent: distributing the revenues from a carbon tax as lump-sum transfers to households reduces income inequality, while spending the revenues on a reduction of labour taxation increases inequality. These results could be relevant for other coal-producing countries, such as South Africa, Germany, or Australia.
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Small Area Estimation
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Utilizing Microsimulation to Estimate the Private and Fiscal Returns to Education: I reland 1987–2011
This study estimates both the fiscal and net private return to education using microsimulation models. This is carried out empirically using I rish data across the period 1987–2011. The results indicate that a more generous tax/benefit system, combined with a greater state burden of education costs initially helped increase the individual's return to education, while reducing the state return from investing in education. However, this trend is reversed by 2011 as significant changes to the Irish tax/benefit system were introduced. The methodology utilized allows us to analyse the specific impact of various components of the tax/benefit system upon these returns.
Rate of return
Fiscal system
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In this paper alternative reforms of present Italian personal income taxation, including a change of the tax unit and the introduction of a flat tax, are studied using a microsimulation model built on a representative sample of the Italian household population. The comparison is performed discussing efficiency and equity of each alternative. Results suggest that main critical points of a family-unit reform include a high effective marginal tax rate for taxpayers with highly elastic labour supply, namely low-income married women. Flat taxation systems would cause no efficiency improvements and a dramatic reduction of tax progressivity and a worsening of redistribution. The analysis of losers and gainers clearly highlights that the distribution of gains with family-unit and flat tax systems would be highly in favour of families in the top quintile of incomes. Among the simulations developed, an adjustment of current Irpef, roughly along the lines suggested on the White Paper on Irpef and family income support, would not worsen inefficiency of current personal income taxation and produce more equal distribution of disposable income.
Flat tax
Equity
Labour supply
Redistribution
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