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Searching for the Inclusive Growth Tax Grail: The Distributional Impact of Growth Enhancing Tax Reform in Ireland

The Economic and Social Review

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Title Searching for the Inclusive Growth Tax Grail: The Distributional Impact of Growth Enhancing Tax Reform in Ireland
 
Creator O'Connor, Brendan
Hynes, Terence
Haugh, David
Lenain, Patrick
 
Subject tax reform; Ireland; economic modelling
 
Description The economic literature suggests that a revenue-neutral shift of tax revenues from income taxes to property taxes would increase GDP per capita in the medium term. This paper analyses for Ireland the consequences of such a shift in the tax mix. In particular, it examines whether this can be carried out in a way that would neither undermine income distribution nor depress government revenue. Simulations using the ESRI tax-benefit model, SWITCH, suggest it is possible to achieve such a broadly revenue-neutral tax shift in a non-regressive way, while lowering marginal tax rates for most taxpayers. In particular, reductions in the Universal Social Charge would reduce marginal and average tax rates and have a positive impact for the income of most households. This could be funded by shifting the tax base toward residential properties, though this might have an adverse effect on income distribution, due to Ireland’s high rates of home ownership throughout the income distribution. The analysis shows that low income groups could be protected through the careful introduction of income-related supports, with revenue losses recovered through a more progressive property tax rate structure. Overall, the simulations show that a shift from labour to property tax can be pro-growth and pro-employment, without equity losses. The paper therefore suggests that tax reform can be inclusive.
 
Publisher The Economic and Social Review
 
Contributor —
 
Date 2016-03-31
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
—
 
Format application/pdf
 
Identifier http://www.esr.ie/article/view/509
 
Source The Economic and Social Review; Vol 47, No 1, Spring (2016); 155-184
0012-9984
 
Language eng
 
Relation http://www.esr.ie/article/view/509/129
 
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