Taxation and the worlds of welfare

Monica Prasad*, Yingying Deng

*Corresponding author for this work

Research output: Contribution to journalArticle

41 Scopus citations

Abstract

We use Luxembourg Income Study (LIS) data to compare the progressivity of the tax structure in the USA and Europe. LIS data allow a comparison of tax rates that attempts to take different starting rates, thresholds and exemptions into account. Our study supports the argument others have made that the USA has more progressive taxes than the European countries. However, we find that Britain's tax structure is more regressive than those of the continental welfare states, making the mapping of tax structure onto the 'three worlds of welfare' imperfect. We also show that it is a mistake to assume that income and property taxes are always progressive: regressive examples of both are common in the data. But sales taxes are regressive wherever they are found, and we suggest that the proportion of tax revenue raised through sales taxes can serve as an index of overall progressivity in situations where the detailed data examined here are not available. We close by outlining several possible explanations for the inverse correlation between tax progressivity and welfare state effort.

Original languageEnglish (US)
Pages (from-to)431-457
Number of pages27
JournalSocio-Economic Review
Volume7
Issue number3
DOIs
StatePublished - Jul 21 2009

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Keywords

  • Capitalist systems
  • Taxation
  • Welfare state

ASJC Scopus subject areas

  • Sociology and Political Science
  • Economics, Econometrics and Finance(all)

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