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Measuring the Effective Tax Burden of Lifetime Personal Income

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  • Jan Vlachý

Abstract

This paper designs and tests a comprehensive model, solved by statistical simulation, which describes and quantifies the effect of the tax system and lifelong income characteristics on the effective tax burden of a population or its segment. In the present application the model is structured and calibrated to analyse the category of employed persons in the Czech Republic. The Czech tax and levy system is shown to be mildly progressive, with a steep digression for very high incomes. It is also shown how the initial income endowment, lifelong income volatility and the minimum wage level impact the structure of effective tax rates, as well as expected unemployment.

Suggested Citation

  • Jan Vlachý, 2015. "Measuring the Effective Tax Burden of Lifetime Personal Income," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2015(3), pages 5-14.
    • Handle: RePEc:prg:jnlefa:v:2015:y:2015:i:3:id:142:p:5-14
    DOI: 10.18267/j.efaj.142
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    More about this item

    Keywords

    Lifetime tax burden; Personal income; Statistical simulation;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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