Taxation of social insurance and redistribution: a comparative analysis of ten welfare states

Abstract

Welfare state regimes vary in their strategies of redistribution. Some welfare states have extensive taxable social insurance schemes, while others rely more on non-taxable means-tested benefits. In order to assess the distributive effects of different programme types, it is necessary to analyse social insurance after taxes, something rarely practised in comparative research. In this paper, we evaluate distributive effects of social insurance after taking taxes into account in 10 welfare states. The main question is to what extent income taxes affect the contribution of social insurance to income inequality. The conclusion is that taxation may have important consequences for both inter- and intra-country comparisons of income redistribution, especially if countries with similar social policy systems are compared. The analyses are based on micro-level income data from the Luxembourg Income Study (LIS).

Les formes de redistribution varient d'un Etat Providence à l'autre. Certains ont des programmes d'assurance sociale étendus soumis à taxation alors que d'autres s'appuient plus sur des allocations sous condition de ressource non-taxables. Afin d'évaluer les effets redistributifs des différents types de programme, il est nécessaire de prendre en compte les effets de la fiscalité, ce qui est rarement le cas dans les analyses comparatives. Nous évaluons dans cet article les effets redistributifs après taxe dans 10 pays. La principale question est de savoir jusqu'à quel point la fiscalité sur les revenus modifie la contribution de l'assurance sociale à la réduction des inégalits de revenu. Notre conclusion est que fiscalité peut avoir des conséquences importantes pour les comparaisons en terme de redistribution des revenus tant entre les pays qu'à l'intérieur de ceux-ci, particulièrement lorsque l'on compare des pays ayant des systèmes sociaux similaires. Cette analyse se fonde sur les données de revenu au niveau micro de provenant de la `Luxembourg Income Study' (LIS).

Keywords

comparative analysis income inequality income taxation redistribution social insurance

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