Burden Reduction and Redistribution Effects of Deductions in Income Tax: An Analysis Using Tax Data

Taro Ohno, Shingo Okamoto and Kazuhiro Inaba
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Taro Ohno: Visiting Professor, National Tax College / Professor, Faculty of Economics and Law, Shinshu University
Shingo Okamoto: Assistant Professor, Research Department, National Tax College
Kazuhiro Inaba: National Tax College

Public Policy Review, 2026, vol. 22, issue 1, 1-27

Abstract: The tax deduction system is one of the key policy issues in Japan’s income tax system. In order to understand how tax deductions affect the progressive burden structure of income tax, it is useful to understand the effect of tax deductions on burden reduction and income redistribution. In this paper, we quantitatively evaluate the burden reduction and redistribution effects of tax deductions and tax credits using tax data on income tax returns held by the National Tax Agency (2020). This paper shows that the burden reduction effect of deductions and credits is largely attributable to tax deductions rather than tax credits, and that the burden reduction effect is larger for higher income classes. This is due to the fact that the amounts of applicable deductions increase with income, especially the income-increasing portion of the employment income deduction and the deduction for social insurance premiums. The results also show that the income-increasing portion of deductions has a negative effect on income redistribution.

Keywords: income tax; tax deduction; tax credit; redistribution effect; tax data (search for similar items in EconPapers)
JEL-codes: D31 H24 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:mof:journl:ppr22_01_02s

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