OECD Taxation Working Papers

ISSN :
2223-5558 (online)
DOI :
10.1787/22235558
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Working papers from the Centre for Tax Policy and Administration of the OECD that cover the full range of the Centre’s work on taxation with the main focus on tax policy related issues.
 

Average Personal Income Tax Rate and Tax Wedge Progression in OECD Countries You or your institution have access to this content

Authors:
Dominique Paturot1, Kirsti Mellbye1, Bert Brys1
Author Affiliations
  • 1: OECD, France

Publication Date
20 Feb 2013
Bibliographic information
No.:
15
Pages
48
DOI
10.1787/5k4c0vhzsq8v-en

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The statutory progressivity of the income taxes paid by wage earners, net of the standard cash benefits they receive, depend on the design and interaction of personal income taxes, social security contributions (SSCs) and cash benefits. In order to capture their combined impact, this paper presents statutory tax progressivity indicators for the 34 OECD member countries on the basis of average effective income tax rates and tax wedges which are calculated using the OECD’s Taxing Wages framework. The analysis shows a decreasing pattern of tax progressivity across income levels. In some countries, the tax system becomes regressive when the SSC ceiling has been reached. Also, child benefits increase progressivity (especially at low income levels) and their effect is larger than the flattening impact of SSCs, except at top income levels. Reductions in SSCs targeted at low-incomes and dependant spouse allowances increase progressivity in some OECD countries. Income-splitting systems typically have the opposite effect.
Keywords:
tax progressivity, personal income tax, social security contributions
JEL Classification:
  • H24: Public Economics / Taxation, Subsidies, and Revenue / Personal Income and Other Nonbusiness Taxes and Subsidies
  • H55: Public Economics / National Government Expenditures and Related Policies / Social Security and Public Pensions