Shifting Taxes from Labor to Consumption: Efficient, but Regressive?

摘要: Shifting taxes from labor income to consumption is regularly suggested as a measure induce work incentives. We investigate the effect of increases in Value Added Tax on supply and distribution Germany, which compensated by revenue-neutral reduction income-related taxes. Based dual data base microsimulation model behavior, we confirm general regressive impact such tax shift short run. When accounting for adjustments, adverse distributional persists personal reductions, while overall effects inequality progressivity become substantially lower when payroll are reduced, due increased incentives, especially low-income households.