Evaluating the redistributional effects of tax policy changes: with an application to the 2006 Norwegian tax reform

Abstracts with downloadable Discussion Papers in PDF are available on the Internet: http://www.ssb.noAbstract: An evaluation strategy is presented for answering the question is the tax schedule more redistributive after a reform than prior to a reform? The proposed procedure builds upon addressing measures of tax redistribution, utilizing micro data from periods before and after the reform. Tax redistributional effects are measured in terms of a “common base” approach, which means that a benchmark is established to identify how the “redistributional efforts” of policy-makers develop over time. When applying this method for evaluation of the 2006 Norwegian tax reform, the results suggest that the modification of the dual income tax system of the 2006 reform has improved the redistributional effect of the schedule. This conclusion is qualified by addressing measurement challenges brought up by the Keywords: Redistributional effects, Income tax, Measurement problems, Common baseThis work is part of the evaluation of the Norwegian tax reform of 2006, initiated and sponsored by the Norwegian Ministry of Finance