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Distribution Effects to be Expected in Austria if the Tax Regime for Low Incomes from Work is Alleviated. Results of a Microsimulation

Listed author(s):
  • Christine Mayrhuber

    (WIFO)

  • Silvia Rocha-Akis

    (WIFO)

  • Christine Zulehner

    (WIFO)

Income from work is subject to a high tax burden, which at the lower end is mostly the result of high social insurance contributions. Alleviating this burden by reducing contributions to social insurance for low-income employees would increase the monthly net income by 5.2 percent for 90 percent of the low-wage employees, as is shown by an estimate using WIFO's microsimulation model. The effect would be particularly large for part-time workers. Nevertheless, the distribution of (equivalised) disposable household income would hardly change at all, and the net income situation of the working poor would improve only slightly. Achieving greater net income effects at household level would require not just introducing an adequate progressive regime for social insurance contributions but also reducing the high marginal and average tax burden for the lower and medium income levels of the current wage tax system.

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Article provided by WIFO in its journal WIFO-Monatsberichte.

Volume (Year): 87 (2014)
Issue (Month): 11 (November)
Pages: 767-781

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Handle: RePEc:wfo:monber:y:2014:i:11:p:767-781
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  1. Olivier Bargain & Marco Caliendo & Peter Haan & Kristian Orsini, 2010. "“Making work pay” in a rationed labor market," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(1), pages 323-351, January.
  2. Hemerijck, Anton & Eichhorst, Werner, 2009. "Whatever Happened to the Bismarckian Welfare State? From Labor Shedding to Employment-Friendly Reforms," IZA Discussion Papers 4085, Institute for the Study of Labor (IZA).
  3. Eckerstorfer, Paul & Steiner, Viktor & Wakolbinger, Florian, 2013. "Steuerreformvorschläge in der Diskussion: Eine Mikrosimulationsanalyse der Aufkommens-, Beschäftigungs- und Verteilungswirkungen für Österreich," Discussion Papers 2013/17, Free University Berlin, School of Business & Economics.
  4. Kristian Orsini, 2007. "Is Belgium "Making Work Pay" ?," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 50(2), pages 193-220.
  5. Viktor Steiner & Katharina Wrohlich, 2005. "Work Incentives and Labor Supply Effects of the ‘Mini-Jobs Reform’ in Germany," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 32(1), pages 91-116, 03.
  6. Stefan Humer & Mathias Moser & Matthias Schnetzer & Michael Ertl & Atila Kilic, 2014. "Einkommensverteilung in Österreich," Working Paper Reihe der AK Wien - Materialien zu Wirtschaft und Gesellschaft 125, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik.
  7. Schneider, Hilmar & Bonin, Holger, 2005. "Wohlfahrts- und Verteilungseffekte eines allgemeinen Freibetrags bei den Sozialabgaben," IZA Discussion Papers 1490, Institute for the Study of Labor (IZA).
  8. Viktor Steiner, 2007. "Beschäftigungsförderung und Einkommenssicherung im Niedriglohnbereich: Wege und Irrwege," Discussion Papers of DIW Berlin 747, DIW Berlin, German Institute for Economic Research.
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