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Should Japanese Tax System Be More Progressive?

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  • Shun-ichiro Bessho
  • Masayoshi Hayashi

Abstract

We investigate the effects of marginal changes of marginal tax rates of Japanese income tax system, computing the social marginal costs of public funds (SMCF) generated by marginal increase in tax rates. We use large micro data sets on Japanese households, and estimate a structural discrete choice model of household labor supply. Our estimation results show that the average of total elasticity of males ranges between 0.0276 and 0.0521, and that of female between 0.0429 and 0.2134. Based on the estimated utility functions, we find that SMCF for raising the marginal tax rate applied for those with low- or medium-income level is smaller than those with more income. Our results could suggest Japanese income tax system should be less progressive.

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  • Shun-ichiro Bessho & Masayoshi Hayashi, 2011. "Should Japanese Tax System Be More Progressive?," Global COE Hi-Stat Discussion Paper Series gd10-181, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hst:ghsdps:gd10-181
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    1. Tomoki Ogasa, 2019. "Income Redistribution Effect of a Shift from Income Deduction to Tax Credit -Discrete Choice Model-Based Simulation Incorporating Labor Supply-," Discussion papers ron313, Policy Research Institute, Ministry of Finance Japan.
    2. Miyazaki, Takeshi & Ishida, Ryo, 2022. "Estimating the elasticity of taxable income: Evidence from top Japanese taxpayers," Japan and the World Economy, Elsevier, vol. 61(C).
    3. Kiho Muroga, 2020. "Work or housework? Mincer’s hypothesis and the labor supply elasticity of married women in Japan," The Japanese Economic Review, Springer, vol. 71(2), pages 303-347, April.

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    More about this item

    Keywords

    Social marginal cost of public funds; structural discrete choice model; household labor supply;
    All these keywords.

    JEL classification:

    • 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
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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