Redistributive Effects on Income Tax Rates and Tax Base 1984-2009: Evidence from Japanese Tax Reforms

Abstract

The primary objective of this paper is to examine how, and to what extent, changes in income tax rates and income tax deductions affect income inequality from a longitudinal perspective, by using microdata of Japanese individuals and households. The findings of this paper could shed light on the effects of tax rates and tax deductions on tax progressivity. First, redistributive effects of Japanese income tax reforms declined for the period from 1984-2009. Second, the tax reforms with reductions in tax rates and in tax base gave rise to greater redistributive effects of income tax rates and smaller redistributive effects of tax base. Third, any progressivity measure and approach to determine pretax income showed the same trends, with respect to the redistributive effects of tax reforms.

Keywords: Income taxation, redistribution, tax deduction, tax rate

JEL Classification: D3, H2, H24