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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.
