Impact of income tax reforms in Argentina on after-tax income distribution
Keywords:
Income Inequality, Income Tax, InflationAbstract
We study income inequality dynamics in Argentina over the 1996-2015 period, before and after taxes on labor and social security contributions. After the 2001-2002 crisis, the country experienced changes in its economic structure, labor market institutions and fiscal policies, with an increase in the size of the public sector. The personal income tax contributed to that expansion by growing in the number of taxpayers and effective rates. The rise was not monotonic, but rather affected by the political cycle. The document describes the historic evolution of the tax’s parameters and its main reforms. We then use administrative payroll data of registered employees to simulate tax liabilities and therefore calculate inequality indicators. We find that after-tax income inequality has a decreasing tendency, particularly towards the end of the period. The distortive tax reforms motivated by the elections create limited but perceptible regressions on the inequality indicators.
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