Distributional Effects of Tax Composition Changes
Frédéric Dufourt  1@  , Lisa Kerdelhué  2, 3@  , Océane Piétri  2, *@  
1 : Aix-Marseille School of Economics  (AMSE)
Ecole Centrale Marseille (ECM), Ecole des Hautes Etudes en Sciences Sociales (EHESS), Centre national de la recherche scientifique (CNRS)
GREQAM, Centre de la Charité, 2 rue de la Charité, 13236 Marseille Cedex 02 -  France
2 : Aix-Marseille Sciences Economiques  (AMSE)
École des Hautes Études en Sciences Sociales : UMR7316, Aix Marseille Université : UMR7316, Ecole Centrale de Marseille : UMR7316, Centre National de la Recherche Scientifique : UMR7316
5-9 Boulevard BourdetCS 5049813205 Marseille Cedex 1 -  France
3 : Centre de recherche de la Banque de France
Banque de France
31 rue Croix des petits champs 75001 PARIS - France -  France
* : Corresponding author

In this paper, we evaluate the consequences of tax composition changes on macroeconomic variables, wealth distribution and inequality. While the macroeconomic effects of these reforms are generally well understood, their distributional impacts, on wealth shares and wealth distribution, are mostly overlooked. We use a heterogeneous agents model with incomplete market and idiosyncratic employment shocks. Following a recent policy experiment in France, we examine the macroeconomic and distributional effects of a budget neutral reduction in labour income tax financed with an increase in capital income tax. The results suggest that impact on individual across the wealth distribution can be very different than the average impact and depends on time horizon. While we have negative long-run and positive short-run effects for macroeconomic variables, the middle class loses the most in the long-run, the richest are suffering the less both in short-run and long-run and that effects on the poorest depend on time-horizon and labour situation.


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