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Comparing the Incidence of Taxes and Social Spending in Brazil and the United States

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  • Sean Higgins

    ()
    (Department of Economics, Tulane University)

  • Nora Lustig

    ()
    (Department of Economics, Tulane University)

  • Whitney Ruble

    ()
    (Department of Economics, Tulane University)

  • Timothy Smeeding

    ()
    (Institute for Research on Poverty, Robert M. La Follette School of Public Affairs, University of Wisconsin-Madison)

Abstract

We perform the first comprehensive fiscal incidence analyses in Brazil and the US, including direct cash and food transfers, targeted housing and heating subsidies, public spending on education and health, and personal income, payroll, corporate income, property, and expenditure taxes. In both countries, primary spending is close to 40 percent of GDP. The US achieves higher redistribution through direct taxes and transfers, primarily due to underutilization of the personal income tax in Brazil and the fact that Brazil’s highly progressive cash and food transfer programs are small while larger transfer programs are less progressive. However, when health and non-tertiary education spending are added to income using the government cost approach, the two countries achieve similar levels of redistribution. This result may be a reflection of better-off households in Brazil opting out of public services due to quality concerns rather than a result of government effort to make spending more equitable.

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File URL: http://econ.tulane.edu/RePEc/pdf/tul1317.pdf
File Function: First Version, November 2013
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Bibliographic Info

Paper provided by Tulane University, Department of Economics in its series Working Papers with number 1317.

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Date of creation: Nov 2013
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Handle: RePEc:tul:wpaper:1317

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Keywords: inequality; fiscal policy; taxation; social spending;

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