The incidence of tax rates on workers’ debt stability and demand regimes

Clara Zanon Brenck

Review of Keynesian Economics, 2025, vol. 13, issue 1, 51-70

Abstract: This paper explores different tax regimes in a Post Keynesian model where workers get into debt to emulate the consumption of upper-income classes. The government taxes income to fund a social wage that would reduce workers’ need to get into debt. Three tax regimes are analyzed: taxing profits, managers’ wages, or both. In a numerical exercise, we explore the effects of changing the within-wage and functional inequalities. The government’s income tax choices and the wage bill’s distribution matter for the economy’s sustainability and the relationship between distribution and growth. The demand regime of the economy is not independent of policy. Taxing only profits and reducing wage inequality are the best possible outcomes in the model if we were to wind down the unsustainability feature of neoliberalism without sacrificing real performance.

Keywords: Inequality; Debt dynamics; Tax regime; Sustainable growth (search for similar items in EconPapers)
JEL-codes: D31 E12 O41 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/view/journals/roke/13/1/article-p51.xml
Restricted Access

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:rokejn:v:13:y:2025:i:1:p51-70

Access Statistics for this article

Review of Keynesian Economics is currently edited by Thomas Palley, Matías Vernengo and Esteban Pérez Caldentey

More articles in Review of Keynesian Economics from Edward Elgar Publishing
Bibliographic data for series maintained by Phillip Thompson (phillip.thompson@e-elgar.co.uk).