Download This PaperTaxing the Rich to Finance Redistribution – Evidence from a Permanent Tax Increase in Singapore
Forthcoming in Management Science
67 Pages Posted: 24 Apr 2020 Last revised: 24 Feb 2023
Date Written: March 31, 2020
Abstract
Based on a representative sample of consumer financial transaction data, this paper studies the consumption and savings response to a 2015 permanent increase in the marginal income tax of the high-income taxpayers. Using difference-in-differences regressions, controlling for individual and time fixed effects, we show robust results that the affected consumers experienced little change in their spending. The pattern is prevalent across consumer demographics and is found even among consumers who are sophisticated, have high levels of debt, or register little income changes. Furthermore, the tax increase financed fiscal redistribution leads to a long-lasting increase in the consumption of the lower-income population.
Keywords: income tax; consumption; savings; redistributive policy; fiscal policy
JEL Classification: H24, E21, H31, H53, H61, H62, H63
Suggested Citation: Suggested Citation
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