Universität zu Köln

Pestel, Nico ORCID: 0000-0003-0062-9514 and Sommer, Eric (2017). SHIFTING TAXES FROM LABOR TO CONSUMPTION: MORE EMPLOYMENT AND MORE INEQUALITY? Rev. Income Wealth, 63 (3). S. 542 - 564. HOBOKEN: WILEY. ISSN 1475-4991

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Abstract

This paper investigates the effect of shifting taxes from labor income to consumption on labor supply and the distribution of income in Germany. We simulate stepwise increases in the value-added tax (VAT) rate, which are compensated by revenue-neutral reductions in income-related taxes. We differentiate between the personal income tax (PIT) and social security contributions (SSC). Based on a dual data base and a microsimulation model of household labor supply behavior, we find a regressive impact of such a tax shift in the short run. When accounting for labor supply adjustments, the adverse distributional impact persists for PIT reductions, while the overall effects on inequality and progressivity become lower when payroll taxes are reduced. This is partly due to increases in aggregate labor supply, resulting from higher work incentives.

Item Type:	Journal Article
Creators:	Creators Email ORCID ORCID Put Code Pestel, Nico UNSPECIFIED orcid.org/0000-0003-0062-9514 UNSPECIFIED Sommer, Eric UNSPECIFIED UNSPECIFIED UNSPECIFIED
URN:	urn:nbn:de:hbz:38-220076
DOI:	10.1111/roiw.12232
Journal or Publication Title:	Rev. Income Wealth
Volume:	63
Number:	3
Page Range:	S. 542 - 564
Date:	2017
Publisher:	WILEY
Place of Publication:	HOBOKEN
ISSN:	1475-4991
Language:	English
Faculty:	Unspecified
Divisions:	Unspecified
Subjects:	no entry
Uncontrolled Keywords:	Keywords Language OPTIMAL TAXATION; DEMAND; DESIGN; REFORM; INCOME Multiple languages Economics Multiple languages
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/22007