Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/62508
Authors: 
Bengtsson, Niklas
Holmlund, Bertil
Waldenström, Daniel
Year of Publication: 
2012
Series/Report no.: 
Discussion Paper series, Forschungsinstitut zur Zukunft der Arbeit 6641
Abstract: 
This paper analyzes the evolution of tax progressivity in Sweden from both annual and lifetime perspectives. Using a rich micro panel with administrative records of incomes, taxes and benefits over the period 1968-2009, we calculate tax rates across the income distribution accounting for different tax bases as well as the role of transfers. The uniquely long time span also allows us to compute tax progressivity as realized over a cohort's entire life cycle. Our main finding is that taxes are considerably less progressive over the lifetime than in any single year. In fact, life cycle taxes are close to proportional, bearing a redistributive effect of only a few percent. Intragenerational income mobility seems to be driving this result, although the Swedish economic crisis of the 1990s and the tax reforms of 1971 and 1991 are also important. Labor income taxes contribute less to progressivity in recent years, whereas transfers to unemployed and old-age pensioners have become increasingly important. These findings are robust to the use of different tax rates, tax bases, sample populations, rates of discounting and controls for reranking.
Subjects: 
tax progressivity
income distribution
lifetime income
redistributive effect
Kakwani index
transfers
JEL: 
D31
H20
Document Type: 
Working Paper

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