Economics, Econometrics and Finance
4 years ago

Tax cuts for the rich widen income gap, burden middle class

Közgazdasági Szemle
The Elasticity of Taxable Income: Estimates and Flat Tax Predictions using the Hungarian Tax Changes in 2005
Péter Bakos, Péter Benczúr, Dóra Benedek

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The article examines how people in Hungary changed their income in response to a tax reform in 2005. The researchers found that when taxes were adjusted, some people adjusted their income too. Higher earners were more likely to change their income compared to lower earners. If Hungary switched to a flat tax system, it could increase tax revenue slightly, but it may also worsen income inequality, especially for middle-income earners.