The Impact on Efficiency and Distribution of a Base-Broadening and Rate-Reducing Tax Reform

Johan Willner*, Lena Granqvist

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

2 Citations (Scopus)

Abstract

We analyze a base-broadening, rate-reducing, and simplifying tax reform, which may be revenue-neutral, or which may keep the average tax rates constant. Such a reform generally improves efficiency under reasonable conditions but not necessarily if the average tax rate is calculated on taxable incomes or if revenue-neutrality refers to aggregate tax payments only. In most cases, an efficiency-improving reform probably increases inequality unless the marginal rate reduction greatly affects low-income taxpayers. So in some cases, there might be a utilitarian case for increasing, rather than reducing the marginal tax rate.

Original languageEnglish
Pages (from-to)273-294
Number of pages22
JournalInternational Tax and Public Finance
Volume9
Issue number3
DOIs
Publication statusPublished - 2002
MoE publication typeA1 Journal article-refereed

Keywords

  • Efficiency
  • Inequality
  • Tax reform

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