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Welfare Effects of Proportional Taxation: Empirical Evidence from Italy, Norway and Sweden

Rolf Aaberge (), Ugo Colombino () and Steinar Strøm

Discussion Papers from Statistics Norway, Research Department

Abstract: This paper employs a particular labor supply model to examine the welfare effects from replacing current tax systems in Italy, Norway and Sweden by proportional taxation on labor income. The results show that there are high efficiency costs for Norway and low costs for Italy and Sweden associated with the current progressive labor income taxes. However, there appears to be large variation in the distribution of welfare gains/losses. "Rich" households - defined by their pre-tax-reform income - tend to benefit more than "poor" households from replacing the current progressive tax systems by proportional taxation.

Keywords: Labor supply; taxation; distribution of income and welfare. (search for similar items in EconPapers)
JEL-codes: H23 H31 J22 (search for similar items in EconPapers)
Date: 1996-04
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