Should the Japanese Tax System Be More Progressive? An Evaluation Using Simulated SMCFs Based on the Discrete Choice Model of Labor Supply

Shun-ichiro Bessho and Masayoshi Hayashi

No CIRJE-F-848, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This paper evaluates the 1999 national income tax reform in Japan by comparing the social marginal costs of public funds (SMCFs) for changing the marginal tax rates in different income brackets before the reform occurred. To do so, we estimate the discrete choice model of labor supply using a data set of Japanese households in 1997 derived from the Employment Status Survey. We obtain an analog of the SMCF that allows for labor supply responses along both the intensive and the extensive margins on an individual basis. We generate such SMCFs using a micro-simulation method that utilizes the discrete choice model estimates for household preferences. Based on the simulated SMCFs evaluated using various distributional weights, we find that the value of the SMCF for a 1% increase in the marginal tax rate in any given income bracket decreases as the bracket moves from the bottom to the top. This finding suggests that the national government should have made the Japanese income tax system more progressive rather than less progressive as carried out in the 1999 reform.

Pages: 32 pages
Date: 2012-04
New Economics Papers: this item is included in nep-acc, nep-cmp, nep-dcm, nep-pbe and nep-pub
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.cirje.e.u-tokyo.ac.jp/research/dp/2012/2012cf848.pdf (application/pdf)

Related works:
Journal Article: Should the Japanese tax system be more progressive? An evaluation using the simulated SMCFs based on the discrete choice model of labor supply (2015)
Working Paper: Should Japanese Tax System Be More Progressive? (2011)
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:tky:fseres:2012cf848

Access Statistics for this paper

More papers in CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo Contact information at EDIRC.
Bibliographic data for series maintained by CIRJE administrative office ().