We analyze the Italian personal income tax (PIT) in the light of the different tools available to the government to achieve income redistribution. Wefocus in particular on three mechanisms: marginal tax rates, deductions, and tax credits. Exploiting an extended version of the standard Pfahler decomposition, we estimate the contribution of each of these three tools to the overall redistributive effect of the PIT using administrative data on more than 1.3 million individual tax returns. Our estimates suggest that more than half of the total PIT redistributive effect is due to the two most important tax credits (the tax credit for employment and the tax credit for retirement income), while the marginal rates schedule contribution is about 40 percent. On the contrary, most of the itemized expenditures do not show any sizable impact on redistribution.

Barbetta, G., Pellegrino, S., Turati, G., What Explains the Redistribution Achieved by the Italian Personal Income Tax? Evidence from Administrative Data, <<PUBLIC FINANCE REVIEW>>, 2018; 2018/46 (1): 7-28. [doi:10.1177/1091142116651488] [http://hdl.handle.net/10807/81034]

What Explains the Redistribution Achieved by the Italian Personal Income Tax? Evidence from Administrative Data

Barbetta, Gianpaolo;Turati, Gilberto
2018

Abstract

We analyze the Italian personal income tax (PIT) in the light of the different tools available to the government to achieve income redistribution. Wefocus in particular on three mechanisms: marginal tax rates, deductions, and tax credits. Exploiting an extended version of the standard Pfahler decomposition, we estimate the contribution of each of these three tools to the overall redistributive effect of the PIT using administrative data on more than 1.3 million individual tax returns. Our estimates suggest that more than half of the total PIT redistributive effect is due to the two most important tax credits (the tax credit for employment and the tax credit for retirement income), while the marginal rates schedule contribution is about 40 percent. On the contrary, most of the itemized expenditures do not show any sizable impact on redistribution.
Inglese
Barbetta, G., Pellegrino, S., Turati, G., What Explains the Redistribution Achieved by the Italian Personal Income Tax? Evidence from Administrative Data, <<PUBLIC FINANCE REVIEW>>, 2018; 2018/46 (1): 7-28. [doi:10.1177/1091142116651488] [http://hdl.handle.net/10807/81034]
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10807/81034
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