The impact of tax policy on the welfare state

Brad, Anca Maria (2012): The impact of tax policy on the welfare state. Published in: Crisis Aftermath: Economic policy changes in the EU and its Member States, Conference Proceedings, Szeged, University of Szeged , Vol. ISBN 9, (2012): pp. 182-195.

Abstract

The paper seeks to find the impact of tax policy on income and wealth redistribution, as well as its effects on welfare. Redistribution through transfers has a major contribution to reducing inequality and polarization of income. The fiscal reforms in present-day circumstances imply as outcome the so called “tax uniformity”, embedding income redistribution through budgetary mechanisms, an arrangement that greatly depends on the alternative chosen by the authorities for the distribution of tax burden among various categories of contributors. In Eastern European economies, under the absence of a sustainable economic growth and structural reforms, flat taxes can lead to polarization of income. The authors argue that if progressive rates are feasible in eastern countries, taxation reconsideration generates economic effects triggered by the change in tax burden and social effects triggered by a decrease in the unemployment, living conditions, education and labour.

• Item Type: MPRA Paper
• Language: English
• Keywords: tax policy; redistribution; flat tax; progressive rates; welfare state
• Subjects: E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook > E62 - Fiscal Policy; D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H20 - General

References

Atkinson, A. B. – Marlier, E. (2010): Income and living conditions in Europe. Available on-line at http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-31-10-555/EN/KS-31-10-555-EN.PDF, accessed: 6 January 2012

Brad, A. (2011a): Fiscal Pressure – Evolution and influences in present-day circumstances, Timisoara Journal of Economics, 14, 1.

Brad, A. (2011b): Variability of taxes and the discriminatory effect of the tax system, Studia Universitatis - Seria Stiinte Economice, vol.1, pp. 397-404.

Brezeanu, P. (2007): European Finance. C.H.Beck, Bucharest

Ciurezu, T. – Dracea, M. (2004): Fiscal pressure on EU member states: its causes and effects of the reduction, Public Finance and Accounting, 15, February, pp. 31-34.

Dolenc, P. – Laporšek, S. (2010): Tax Wedge on Labour and its Effect on Employment Growth in the European Union – Prague Economic Papers, 14, pp. 344-358.

Esping, A. (1990): The Three Worlds of Welfare Capitalism. Polity Press, Cambridge.

Keen, M. – Kim, Y. – Varsano, R. (2006): The “Flat Tax(es)”: Principles and Evidence, International Monetary Fund. Available on-line at http://www.imf.org/external/pubs/ft/wp/2006/wp06218.pdf, accessed: 15 January 2012

Lugo, M.A. (2007): Comparing multidimensional indices of inequality: Methods and application. Research on Economic Inequality, 14, pp. 213-236.

Molnar, M. (2011): Income polarization in Romania, Romanian Journal of Economic Forecasting, 14, 2, pp. 64-83.

Socol, C. - Marinaş, M. - Socol, G. (2010): Sustenabilitate fiscală şi coeziune socială. Comun şi specific în submodelele Uniunii Europene - Economie teoretică şi aplicată, XVII, 3(544), pp. 25-44.

Voinea, L. - Mihaescu, F. (2009): The Impact of the Flat Tax Reform on Inequality - the case of Romania, Romanian Journal of Economic Forecasting, 12, 4, pp. 19-41.

*** European Commission (2009): Directorate-General for Taxation and Customs Union, Reckon report.

*** European Comission (2010): Taxation trends in the European Union, available on-line at: http://ec.europa.eu/taxation_customs/taxation/gen_info/economic_analysis/tax_structures/index_en.htm, accessed: 07 January 2012.

*** Eurostat: Sustenability report in 2009.