Progression and Revenue Effects of Income Tax Reform

Posted: 21 Jul 2009

See all articles by Koen Caminada

Koen Caminada

Leiden Law School - Department of Economics

Kees Goudswaard

Leiden Law School - Department of Economics

Date Written: January 1, 1996

Abstract

Usually, only initial revenue effects of personal income tax reforms are considered. However, a tax reform characterized by base broadening in exchange for rate reduction can reduce the income elasticity of tax revenue. In that case, the increase in revenue after income growth will be relatively smaller: the tax reform has a negative effect on revenue in the second period. Using the microtax model of the Central Planning Bureau we simulated the effects of the Dutch Oort reform 1990 on revenue elasticities and, consequently, on tax revenue. The income tax revenue elasticity declined by 17 percent which caused an additional revenue loss of 0.6 percent in 1990, rising to 3.8 percent in 1993.

Keywords: tax reform, progression, income tax revenue elasticity, budgetary effects

Suggested Citation

Caminada, Koen and Goudswaard, Kees, Progression and Revenue Effects of Income Tax Reform (January 1, 1996). International Tax and Public Finance, Vol. 3, No. 1, 1996, Available at SSRN: https://ssrn.com/abstract=1436000

Koen Caminada (Contact Author)

Leiden Law School - Department of Economics ( email )

P.O. Box 9520
2300 RA Leiden, NL-2300RA
Netherlands
++31715277858 (Phone)

HOME PAGE: http://www.law.leiden.edu/organisation/taxlawandeconomics/economics/staff/caminada.html

Kees Goudswaard

Leiden Law School - Department of Economics ( email )

P.O. Box 9520
2300 RA Leiden, NL-2300RA
Netherlands

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