Effects of Flat Tax Reforms in Western Europe on Income Distribution and Work Incentives
AbstractThe flat income tax has become increasingly popular recently, yet its implementation is limited to Eastern Europe. We analyse the distributional and efficiency effects of flat tax scenarios for Western European countries. Our simulations show that flat tax rates required to attain revenue neutrality with existing basic allowances improve labour supply incentives. However, they result in higher inequality and polarisation. Flat rates necessary to keep the inequality levels unchanged allow for some scope for flat taxes to increase both equity and efficiency. Our analysis suggests that Mediterranean countries are more likely to benefit from flat taxes.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3721.
Length: 37 pages
Date of creation: Sep 2008
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Find related papers by JEL classification:
- C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
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- NEP-ACC-2008-10-13 (Accounting & Auditing)
- NEP-ALL-2008-10-13 (All new papers)
- NEP-CMP-2008-10-13 (Computational Economics)
- NEP-EEC-2008-10-13 (European Economics)
- NEP-LAB-2008-10-13 (Labour Economics)
- NEP-PBE-2008-10-13 (Public Economics)
- NEP-PUB-2008-10-13 (Public Finance)
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