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How does population ageing impact on personal income taxes and social security contributions?


  • Prammer, Doris


This paper analyses the impact of population ageing on income tax revenues and social security contributions for Austria. A static analysis focusing only on ageing - based on three population scenarios from the literature – leads to declining per capita income tax revenues and social security contributions of up to ten percent. However, a dynamic analysis combining the population scenarios with long run scenarios, that assume growing real wages and pension benefits, leads to increasing per capita income tax revenues and social security contributions. The findings of the dynamic analysis are driven by three factors: First and most importantly, by increasing wage and pension benefits. Second, by population growth that counteracts negative per capita effects of ageing on overall revenues. Third, new status-specific estimates of tax elasticities utilizing micro-data and quantile regression also explain 1/6 th of the observed increase.

Suggested Citation

  • Prammer, Doris, 2019. "How does population ageing impact on personal income taxes and social security contributions?," The Journal of the Economics of Ageing, Elsevier, vol. 14(C).
  • Handle: RePEc:eee:joecag:v:14:y:2019:i:c:s2212828x18300586
    DOI: 10.1016/j.jeoa.2018.12.005

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    References listed on IDEAS

    1. Markus Knell & Esther Segalla & Andrea Weber, 2015. "Expected retirement age and pension benefits in Austria: evidence from survey data," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 35-57.
    2. Koester, Gerrit B. & Priesmeier, Christoph, 2012. "Estimating dynamic tax revenue elasticities for Germany," Discussion Papers 23/2012, Deutsche Bundesbank.
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    4. Alison Felix & Kate Watkins, 2013. "The impact of an aging U.S. population on state tax revenues," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 95-127.
    5. Fabrizio Balassone & Jorge Cunha & Geert Langenus & Bernhard Manzke & Jeanne Pavot & Doris Prammer & Pietro Tommasino, 2011. "Fiscal sustainability and policy implications: a post-crisis analysis for the euro area," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 3(2), pages 210-234.
    6. Bernhard Grossmann & Doris Prammer, 2005. "A Disaggregated Approach to Analyzing Public Finances in Austria," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 4, pages 61-75.
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    8. Hiroyuki Yashio & Keishi Hachisuka, 2014. "Impact of Population Aging on the Personal Income Tax Base in Japan : Simulation Analysis of Taxation on Pension Benefits Using Micro Data," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 10(3), pages 519-542, October.
    9. Robert Price & Thai-Thanh Dang & Yvan Guillemette, 2014. "New Tax and Expenditure Elasticity Estimates for EU Budget Surveillance," OECD Economics Department Working Papers 1174, OECD Publishing.
    10. Bouthevillain, Carine & Cour-Thimann, Philippine & van de Dool, Gerrit & Hernández de Cos, Pablo & Langenus, Geert & Mohr, Matthias & Momigliano, Sandro & Tujula, Mika, 2001. "Cyclically adjusted budget balances: an alternative approach," Working Paper Series 77, European Central Bank.
    11. John Creedy & Norman Gemmell, 2004. "The Income Elasticity of Tax Revenue: Estimates for Income and Consumption Taxes in the United Kingdom," Fiscal Studies, Institute for Fiscal Studies, vol. 25(1), pages 55-77, March.
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    More about this item


    Taxation; Population ageing; Pension expenditure projection; Revenue to base elasticity;
    All these keywords.

    JEL classification:

    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions


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