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What makes personal income taxes progressive? The case of Belgium

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  • André Decoster
  • Isabelle Standaert
  • Christian Valenduc
  • Guy Van Camp

Abstract

In this paper we investigate the progressivity impact of various components of the Belgian personal income tax system, before and after a major reform of this system. The reform reduced the top tax rates, broadened the tax base and increased tax credits. We show that, contrary to the opinion, commonly expressed in public debates, the reform did not reduce aggregate liability progression of the system and that the rate structure is relatively unimportant in explaining progressivity.

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Bibliographic Info

Article provided by ULB -- Universite Libre de Bruxelles in its journal Brussels economic review.

Volume (Year): 45 (2002)
Issue (Month): 3 ()
Pages: 91-112

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Handle: RePEc:bxr:bxrceb:y:2002:v:45:i:3:p:91-112

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Keywords: Personal income tax; Tax reform; Progressivity;

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  1. Pfahler, Wilhelm, 1990. "Redistributive Effect of Income Taxation: Decomposing Tax Base and Tax Rates Effects," Bulletin of Economic Research, Wiley Blackwell, vol. 42(2), pages 121-29, April.
  2. Keen, Michael & Papapanagos, Harry & Shorrocks, Anthony, 2000. "Tax Reform and Progressivity," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(460), pages 50-68, January.
  3. Duclos, Jean-Yves, 1997. "The asymptotic distribution of linear indices of inequality, progressivity and redistribution," Economics Letters, Elsevier, Elsevier, vol. 54(1), pages 51-57, January.
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  5. F. Chantreuil & A. Trannoy, 1999. "Inequality decomposition values : the trade-off between marginality and consistency," THEMA Working Papers 99-24, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
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  7. Pechman, Joseph A, 1990. "The Future of the Income Tax," American Economic Review, American Economic Association, American Economic Association, vol. 80(1), pages 1-20, March.
  8. Pfahler, Wilhelm, 1987. "Redistributive Effects of Tax Progressivity: Evaluating a General Class of Aggregate Measures," Public Finance = Finances publiques, , , vol. 42(1), pages 1-31.
  9. André Decoster & Guy Van Camp, 1998. "The unit of analysis in microsimulation models for personal income taxes: fiscal unit or household?," Public Economics Working Paper Series, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics ces9833, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Working Group Public Economics.
  10. Feldstein, Martin, 1988. "Imputing Corporate Tax Liabilities to Individual Taxpayers," National Tax Journal, National Tax Association, vol. 41(1), pages 37-59, March.
  11. Martin Feldstein, 1987. "Imputing Corporate Tax Liabilities to Individual Taxpayers," NBER Working Papers 2349, National Bureau of Economic Research, Inc.
  12. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Equivalence Scale Relativities and the Extent of Inequality and Poverty," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 102(414), pages 1067-82, September.
  13. Jenkins, Stephen P & Cowell, Frank A, 1994. "Parametric Equivalence Scales and Scale Relativities," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 104(425), pages 891-900, July.
  14. Adam Wagstaff & Eddy van Doorslaer, 2001. "What Makes the Personal Income Tax Progressive? A Comparative Analysis for Fifteen OECD Countries," International Tax and Public Finance, Springer, Springer, vol. 8(3), pages 299-316, May.
  15. Bishop, John A & Formby, John P & Zheng, Buhong, 1998. "Inference Tests for Gini-Based Tax Progressivity Indexes," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 16(3), pages 322-30, July.
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Cited by:
  1. André DECOSTER & Guy VAN CAMP, 2000. "Redistributive Effects of the Shift from Personal Income Taxes to Indirect Taxes: Belgium 1988-1993," Center for Economic Studies - Discussion papers, Katholieke Universiteit Leuven, Centrum voor Economische Studiën ces0007, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  2. Vaqar Ahmed & Cathal O'Donoghue, 2009. "Redistributive Effect of Personal Income Taxation in Pakistan," Working Papers, National University of Ireland Galway, Department of Economics 0143, National University of Ireland Galway, Department of Economics, revised 2009.

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