Reduced Tax Progressivity in Norway in the Nineties The Effect from Tax Changes
AbstractThe inequality in pre-tax income increases in Norway in the 1990s, while the distribution of taxes is about unaltered. This means that tax progressivity has decreased in the period, as measured by summary indices of tax progressivity. This paper discusses to what extent this observed decrease in tax progressivity can be explained by tax changes in the period, by analysing individual income data. As marginal tax rates at high income levels have been substantially reduced in the period, for instance through the tax reform of 1992, it is expected that tax changes may have influenced the degree of inequality in pre-tax incomes. This behavioral effect is examined by deriving tax elasticity estimates, obtained from various panel data set regressions. Moreover, the tax changes may also have shifted the distributional burden of taxes for unaltered level of pre-tax income inequality. In order to identify this (direct) effect of tax-law alterations, the same fixed distribution of pre-tax income is exposed to various tax-laws in the period.
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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 335.
Date of creation: Dec 2002
Date of revision:
tax progressivity; progressivity measures; tax elasticity estimates; panel data; random effects model; fixed effects model;
Find related papers by JEL classification:
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
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- Karl Ove Aarbu & Thor Olav Thoresen, 1997. "The Norwegian Tax Reform; Distributional Effects and the High-income Response," Discussion Papers 207, Research Department of Statistics Norway.
- John Bishop & K. Chow & John Formby & Chih-Chin Ho, 1997. "Did Tax Reform Reduce Actual US Progressivity? Evidence from the Taxpayer Compliance Measurement Program," International Tax and Public Finance, Springer, vol. 4(2), pages 177-197, May.
- Abdelkrim Araar, 2008. "Social Classes, Inequality and Redistributive Policies in Canada," Cahiers de recherche 0817, CIRPEE.
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