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Mobility and the lifetime distributional impact of tax and transfer reforms

Peter Levell, Barra Roantree () and Jonathan Shaw ()
Additional contact information
Jonathan Shaw: Institute for Fiscal Studies and Financial Conduct Authority

No W17/17, IFS Working Papers from Institute for Fiscal Studies

Abstract: This paper examines the distributional impact of increases to out-of-work transfers, increases to work-contingent transfers, and increases in higher rates of income tax over the whole of life. We find that, in contrast to what is implied by standard snapshot analyses, increases to work-contingent benefits are just as effective at redistributing resources to the lifetime poor as increases to out-of-work benefits. This has important implications for the equity-efficiency trade-off typically thought to apply to work-contingent transfers. However, we find that higher rates of tax on annually assessed income are an effective way of targeting the lifetime rich, as incomes are more persistent towards the top of the distribution. Our results illustrate the importance of moving beyond an exclusively snapshot perspective when analysing tax and transfer reforms. This working paper is an updated version of W16/17.

Keywords: inequality; redistribution; income mobility; lifetime; tax and transfer reform (search for similar items in EconPapers)
JEL-codes: D31 H20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe
Date: 2017-08-25
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Working Paper: Mobility and the lifetime distributional impact of tax and transfer reforms (2016) Downloads
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