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Changes in the tax mix from income taxation to GST: Revenue and redistribution

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  • John Creedy
  • Angela Mellish

Abstract

This paper examines the conditions under which a partial shift from a multi-step personal income tax structure towards a general consumption tax can be both revenue-neutral and distribution-neutral, in a cross-sectional context. In the absence of a tax-free-threshold, this can be achieved with a broad-based consumption tax, or one in which, at each income level, the proportion of taxed expenditure is independent of total expenditure. Such a change, involving a smaller percentage reduction in the higher marginal tax rates, is also shown to increase labour supply in a simple continuous-hours model.

Suggested Citation

  • John Creedy & Angela Mellish, 2011. "Changes in the tax mix from income taxation to GST: Revenue and redistribution," New Zealand Economic Papers, Taylor & Francis Journals, vol. 45(3), pages 299-309, May.
    • Handle: RePEc:taf:nzecpp:v:45:y:2011:i:3:p:299-309
    DOI: 10.1080/00779954.2011.591286
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    References listed on IDEAS

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    1. John Creedy & Norman Gemmell, 2006. "Modelling Tax Revenue Growth," Books, Edward Elgar Publishing, number 4073, June.
    2. John Creedy, 1998. "The Dynamics of Inequality and Poverty," Books, Edward Elgar Publishing, number 1484, June.
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    1. John Creedy & Jesse Eedrah, 2016. "Income redistribution and changes in inequality in New Zealand from 2007 to 2011: Alternative distributions and value judgements," New Zealand Economic Papers, Taylor & Francis Journals, vol. 50(2), pages 129-152, August.
    2. John Creedy & Penny Mok, 2017. "Labour supply in New Zealand and the 2010 tax and transfer changes," New Zealand Economic Papers, Taylor & Francis Journals, vol. 51(1), pages 60-78, January.
    3. John Creedy & Jesse Eedrah, 2014. "The Role of Value Judgements in Measuring Inequality," Treasury Working Paper Series 14/13, New Zealand Treasury.
    4. John Creedy & Penny Mok, 2017. "Labour supply in New Zealand and the 2010 tax and transfer changes," New Zealand Economic Papers, Taylor & Francis Journals, vol. 51(1), pages 60-78, January.
    5. John Creedy & Jesse Eedrah, 2016. "Income redistribution and changes in inequality in New Zealand from 2007 to 2011: Alternative distributions and value judgements," New Zealand Economic Papers, Taylor & Francis Journals, vol. 50(2), pages 129-152, August.

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