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European fiscal solidarity: an EU-wide optimal income tax approach

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  • Laura Seelkopf
  • Hongyan Yang

Abstract

The current financial crisis has brought Europe to a critical juncture. In this paper, we map fiscally the United States of Europe. We simulate an optimal EU-wide income tax and calculate the implied cross-country transfers. The comparison of the implied transfers with the real transfers shows how insufficient the actual transfers are in reducing income disparities across the EU. Moreover, to evaluate the chances for a stronger European fiscal integration within different (core-) groups of member states, we illustrate the winners and losers from optimal EU-wide income redistribution across the Union. While the need for centralised redistribution grows with the number of heterogeneous member states, the implementation of a European income tax becomes, at the same time, ever more unlikely.

Suggested Citation

  • Laura Seelkopf & Hongyan Yang, 2018. "European fiscal solidarity: an EU-wide optimal income tax approach," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 14(1/2), pages 145-163.
    • Handle: RePEc:ids:ijpubp:v:14:y:2018:i:1/2:p:145-163
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    Cited by:

    1. Eren Gürer, 2021. "Equity-efficiency implications of a European tax and transfer system," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 57(2), pages 301-346, August.
    2. Krajňák Michal, 2023. "Does the Type of Nominal Personal Income Tax Rate Affect Its Progressivity? A Case Study from the Czech Republic," Business Systems Research, Sciendo, vol. 14(1), pages 93-111, September.

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