1. Taxes and benefits
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A microsimulation approach to an optimal Swedish income tax

  1. Peter Ericson  Is a corresponding author
  2. Lennart Flood  Is a corresponding author
  1. Empirica, Högbergsgatan 50, Sweden
  2. School of Business, Economics and Law, University of Gothenburg, Department of Economics, Sweden
Research article
Volume 5(2) Autumn 2012
Cite this article as: P. Ericson, L. Flood; 2012; A microsimulation approach to an optimal Swedish income tax; International Journal of Microsimulation; 5(2); 2-21. doi: 10.34196/ijm.00069
3 figures and 6 tables

Figures

Figure 1
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Structure of SWEtaxben.
Figure 2
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The Swedish income tax in 2006.

Note: taxes are evaluated at an average municipal tax rate (31.44%). The axis on the left hand side shows marginal and average tax rates and the axis on the right hand side refers to the income distribution.

Figure 3
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The optimal tax profiles compared to the base year 2009.

Tables

Table 1

Uncompensated wage elasticities by family type

Household Single mothers Single Single
Wage increase by 1% Male Female Female Female Male
Male 0.10 −0.07 0.05
Female 0 0.16 0.21 0.38
Table 2

Distributional weight profiles of four different social welfare functions

W1 (Bonferroni) W2 (Gini) W3 W∞ (Utilitarian)
p(.01)/p(.5) 6.64 1.98 1.33 1
p(.05)/p(.5) 4.32 1.90 1.33 1
p(.30)/p(.5) 1.74 1.40 1.21 1
p(.95)/p(.5) 0.07 0.10 0.13 1
Table 3

Estimated parameters of the social welfare function

Estimates Standard Errors
Log leisure, βl 3.0985 0.0215
Log leisure squared, βll 0.3620 0.0151
Log income, βC 4.7262 0.0224
Log income squared, βCC −0.0616 0.0089
Table 4
Flat tax.
Reform Description Hours Participation Budget Disposable income Labor income Income tax GINI D9/D2
0 Base 2006 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.0% 2.34
1 20% 4.78% 1.55% −10.28% 17.35% 4.88% −30.93% 8.2% 2.84
2 21% 4.60% 1.44% −9.13% 15.99% 4.72% −27.99% 8.3% 2.81
3 22% 4.41% 1.34% −7.98% 14.62% 4.55% −25.07% 8.5% 2.77
4 23% 4.18% 1.21% −6.86% 13.23% 4.36% −22.16% 8.6% 2.74
5 24% 3.95% 1.09% −5.75% 11.86% 4.16% −19.26% 8.8% 2.70
6 25% 3.69% 0.95% −4.66% 10.47% 3.95% −16.39% 9.0% 2.67
7 26% 3.43% 0.82% −3.57% 9.09% 3.73% −13.52% 9.2% 2.63
8 27% 3.18% 0.67% −2.50% 7.71% 3.51% −10.67% 9.4% 2.60
9 28% 2.89% 0.50% −1.44% 6.32% 3.27% −7.83% 9.7% 2.57
10 29% 2.61% 0.32% −0.40% 4.95% 3.04% −5.01% 9.9% 2.53
11 30% 2.29% 0.12% 0.61% 3.56% 2.77% −2.21% 10.1% 2.50
12 31% 1.98% −0.08% 1.64% 2.18% 2.51% 0.58% 10.4% 2.46
13 32% 1.67% −0.27% 2.64% 0.80% 2.24% 3.35% 10.6% 2.43
14 33% 1.32% −0.49% 3.61% −0.56% 1.96% 6.11% 10.9% 2.40
15 34% 0.95% −0.73% 4.55% −1.94% 1.65% 8.83% 11.2% 2.36
16 35% 0.60% −0.95% 5.52% −3.30% 1.38% 11.56% 11.4% 2.33
Table 5
Age-dependent taxes.
Reform Flat tax Up 26–46 (%) Down 46–65 (%) Hours Participation Budget Disposabl e-income Labor income Income tax GINI D9/D2
0 Base 2006 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.0% 2.34
1 15% 1.00 1.00 3.89% 1.11% −6.60% 12.46% 4.02% −21.12% 6.6% 2.68
2 15% 1.05 1.05 3.77% 1.05% −6.15% 11.87% 3.92% −19.93% 6.6% 2.67
3 15% 1.10 1.10 3.65% 0.98% −5.71% 11.28% 3.81% −18.74% 6.6% 2.65
4 15% 1.15 1.15 3.53% 0.92% −5.27% 10.70% 3.71% −17.56% 6.7% 2.63
5 15% 1.20 1.20 3.40% 0.85% −4.85% 10.10% 3.59% −16.39% 6.8% 2.62
6 15% 1.25 1.25 3.26% 0.77% −4.43% 9.51% 3.47% −15.23% 6.9% 2.60
7 15% 1.30 1.30 3.11% 0.68% −4.02% 8.91% 3.33% −14.08% 7.0% 2.59
8 15% 1.35 1.35 2.97% 0.60% −3.60% 8.33% 3.22% −12.92% 7.1% 2.57
9 15% 1.40 1.40 2.83% 0.52% −3.19% 7.74% 3.09% −11.77% 7.2% 2.56
10 15% 1.45 1.45 2.66% 0.42% −2.81% 7.14% 2.94% −10.65% 7.3% 2.54
11 15% 1.50 1.50 2.50% 0.32% −2.43% 6.55% 2.80% −9.52% 7.5% 2.52
12 15% 1.55 1.55 2.33% 0.21% −2.05% 5.96% 2.65% −8.41% 7.7% 2.51
13 15% 1.60 1.60 2.18% 0.13% −1.65% 5.38% 2.52% −7.27% 7.8% 2.49
14 15% 1.65 1.65 1.99% 0.00% −1.30% 4.78% 2.35% −6.19% 8.0% 2.48
15 15% 1.70 1.70 1.81% −0.12% −0.94% 4.19% 2.19% −5.09% 8.2% 2.47
16 15% 1.75 1.75 1.58% −0.27% −0.63% 3.58% 1.98% −4.05% 8.5% 2.45
17 15% 1.80 1.80 1.36% −0.43% −0.32% 2.98% 1.79% −3.00% 8.7% 2.44
18 15% 1.85 1.85 1.16% −0.56% 0.02% 2.39% 1.62% −1.94% 9.0% 2.42
19 15% 1.90 1.90 0.93% −0.72% 0.32% 1.80% 1.42% −0.90% 9.3% 2.42
20 15% 1.95 1.95 0.73% −0.85% 0.65% 1.22% 1.25% 0.15% 9.5% 2.40
21 15% 2.00 2.00 0.50% −1.00% 0.94% 0.63% 1.05% 1.16% 9.8% 2.39
22 Extended 2009 in-work tax credit 1.79% 1.52% −3.93% 5.76% 1.38% −11.55% −1.4% 2.48
Table 6
Combination of tax/benefits15.
Reform Top level Level Break point Housing allowance Credit/deduction Hours Participation Budget Disposable income Labor income Income tax GINI D9/D2 W1 W2 W3 W∞
0 0% 0% 0% 0% 2006 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.0% 2.34 80 80 80 76
39 0% -25% 25% 50% 2009 + age 2.69% 1.54% −4.85% 8.31% 2.49% −14.97% 1.6% 2.46 17 3 1 4
79 −100% −25% 25% 50% 2009 + age 2.74% 1.54% −4.85% 8.46% 2.58% −15.11% 2.1% 2.47 21 5 2 2
59 −100% 0% 25% 50% 2009 + age 2.54% 1.53% −4.76% 7.90% 2.27% −14.48% 0.9% 2.45 18 6 3 6
77 −100% −25% 25% 50% 2009 +50% 3.06% 1.91% −7.51% 11.40% 2.80% −21.75% 1.1% 2.47 12 7 5 21
19 0% 0% 25% 50% 2009 + age 2.49% 1.53% −4.76% 7.72% 2.16% −14.31% 0.3% 2.45 22 9 4 13
37 0% −25% 25% 50% 2009 +50% 3.03% 1.91% −7.48% 11.27% 2.73% −21.61% 0.7% 2.47 11 8 6 24
69 −100% −25% 0% 50% 2009 + age 2.18% 1.46% −4.47% 7.21% 2.00% −13.40% 1.0% 2.42 16 10 9 14
29 0% −25% 0% 50% 2009 + age 2.10% 1.46% −4.44% 6.96% 1.84% −13.14% 0.3% 2.42 13 11 12 18
78 −100% −25% 25% 50% 2009 +100% 3.52% 2.35% −10.60% 14.87% 3.11% −29.50% 0.1% 2.48 1 1 11 46
38 0% −25% 25% 50% 2009 +100% 3.49% 2.36% −10.57% 14.74% 3.05% −29.35% −0.3% 2.48 2 2 13 50
57 −100% 0% 25% 50% 2009 +50% 2.88% 1.90% −7.40% 10.87% 2.52% −21.14% −0.1% 2.45 15 16 16 31
67 −100% −25% 0% 50% 2009 +50% 2.55% 1.84% −7.12% 10.23% 2.27% −20.11% 0.0% 2.42 9 14 20 35
34 0% −25% 25% 0% 2009 + age 2.82% 1.64% −4.66% 8.29% 2.59% −14.92% 1.7% 2.47 51 22 7 3
58 −100% 0% 25% 50% 2009 +100% 3.36% 2.35% −10.48% 14.37% 2.87% −28.89% −1.0% 2.47 3 4 18 59
74 −100% −25% 25% 0% 2009 + age 2.86% 1.64% −4.67% 8.43% 2.68% −15.05% 2.1% 2.47 52 25 8 1
54 −100% 0% 25% 0% 2009 + age 2.66% 1.62% −4.58% 7.87% 2.37% −14.42% 0.9% 2.45 48 24 10 5
64 −100% −25% 0% 0% 2009 + age 2.32% 1.57% −4.27% 7.19% 2.11% −13.34% 1.0% 2.42 41 26 15 12
27 0% −25% 0% 50% 2009 +50% 2.47% 1.84% −7.10% 9.98% 2.12% −19.86% −0.7% 2.42 10 17 25 43
17 0% 0% 25% 50% 2009 +50% 2.82% 1.89% −7.41% 10.70% 2.40% −20.98% −0.6% 2.45 19 19 24 36
73 −100% −25% 25% 0% 2009 +100% 3.62% 2.43% −10.44% 14.84% 3.20% −29.47% 0.2% 2.48 25 18 19 39
24 0% −25% 0% 0% 2009 + age 2.23% 1.56% −4.25% 6.93% 1.96% −13.08% 0.3% 2.42 42 28 17 16
14 0% 0% 25% 0% 2009 + age 2.61% 1.63% −4.58% 7.70% 2.26% −14.26% 0.4% 2.45 54 30 14 10
49 −100% 0% 0% 50% 2009 + age 1.79% 1.44% −4.28% 6.27% 1.49% −12.28% −0.6% 2.39 23 23 32 32
36 0% −25% 25% 50% 2009 2.48% 1.30% −4.47% 7.75% 2.33% −13.82% 1.9% 2.46 37 38 26 11
76 −100% −25% 25% 50% 2009 2.52% 1.30% −4.47% 7.89% 2.42% −13.95% 2.3% 2.47 38 40 27 8
18 0% 0% 25% 50% 2009 +100% 3.31% 2.35% −10.48% 14.20% 2.75% −28.74% −1.4% 2.46 6 13 29 66
68 −100% −25% 0% 50% 2009 +100% 3.06% 2.30% −10.21% 13.76% 2.63% −27.93% −1.0% 2.44 4 12 30 68
33 0% −25% 25% 0% 2009 +100% 3.59% 2.43% −10.42% 14.71% 3.13% −29.32% −0.2% 2.48 26 20 23 48
72 −100% −25% 25% 0% 2009 +50% 3.19% 2.01% −7.33% 11.38% 2.90% −21.71% 1.1% 2.47 47 33 21 19
32 0% −25% 25% 0% 2009 +50% 3.16% 2.02% −7.30% 11.26% 2.84% −21.56% 0.7% 2.47 46 34 22 22
28 0% −25% 0% 50% 2009 +100% 2.98% 2.30% −10.17% 13.53% 2.50% −27.67% −1.6% 2.44 5 15 34 72
56 −100% 0% 25% 50% 2009 2.32% 1.29% −4.39% 7.34% 2.11% −13.32% 1.1% 2.45 36 43 31 17
9 0% 0% 0% 50% 2009 + age 1.69% 1.45% −4.25% 5.95% 1.30% −11.95% −1.4% 2.39 24 31 40 45
66 −100% −25% 0% 50% 2009 1.96% 1.22% −4.10% 6.65% 1.84% −12.25% 1.2% 2.42 32 45 39 26
52 −100% 0% 25% 0% 2009 +50% 3.01% 2.00% −7.22% 10.86% 2.63% −21.09% 0.0% 2.46 49 37 28 29
53 −100% 0% 25% 0% 2009 +100% 3.47% 2.43% −10.32% 14.35% 2.95% −28.86% −0.9% 2.47 28 27 33 56
16 0% 0% 25% 50% 2009 2.27% 1.29% −4.38% 7.16% 2.00% −13.16% 0.5% 2.45 39 48 35 23
47 −100% 0% 0% 50% 2009 +50% 2.18% 1.81% −6.95% 9.32% 1.77% −19.04% −1.5% 2.40 14 29 48 61
26 0% −25% 0% 50% 2009 1.87% 1.22% −4.07% 6.39% 1.68% −11.99% 0.5% 2.42 33 49 43 28
62 −100% −25% 0% 0% 2009 +50% 2.69% 1.95% −6.93% 10.21% 2.38% −20.06% 0.0% 2.43 44 41 36 34
48 −100% 0% 0% 50% 2009 +100% 2.72% 2.28% −10.03% 12.89% 2.17% −26.89% −2.4% 2.41 7 21 52 77
44 −100% 0% 0% 0% 2009 + age 1.92% 1.54% −4.09% 6.24% 1.60% −12.22% −0.6% 2.39 50 44 38 30
63 −100% −25% 0% 0% 2009 +100% 3.16% 2.38% −10.04% 13.73% 2.72% −27.90% −0.9% 2.44 27 32 44 65
31 0% −25% 25% 0% 2009 2.63% 1.42% −4.27% 7.73% 2.45% −13.75% 1.9% 2.47 61 58 41 9
22 0% −25% 0% 0% 2009 +50% 2.61% 1.95% −6.91% 9.97% 2.23% −19.81% −0.6% 2.42 45 46 42 41
13 0% 0% 25% 0% 2009 +100% 3.41% 2.42% −10.32% 14.17% 2.84% −28.70% −1.4% 2.47 31 35 45 64
12 0% 0% 25% 0% 2009 +50% 2.96% 2.00% −7.23% 10.68% 2.51% −20.93% −0.5% 2.45 56 50 37 33
71 −100% −25% 25% 0% 2009 2.67% 1.42% −4.27% 7.88% 2.54% −13.89% 2.3% 2.47 63 59 47 7
51 −100% 0% 25% 0% 2009 2.47% 1.41% −4.19% 7.32% 2.23% −13.26% 1.1% 2.45 59 57 46 15
7 0% 0% 0% 50% 2009 +50% 2.06% 1.81% −6.94% 9.00% 1.57% −18.74% −2.3% 2.39 20 39 56 71
23 0% −25% 0% 0% 2009 +100% 3.09% 2.38% −10.00% 13.50% 2.59% −27.63% −1.5% 2.44 30 36 51 70
46 −100% 0% 0% 50% 2009 1.56% 1.20% −3.92% 5.70% 1.32% −11.13% −0.4% 2.39 35 53 57 44
11 0% 0% 25% 0% 2009 2.42% 1.41% −4.19% 7.14% 2.11% −13.10% 0.6% 2.45 60 60 50 20
8 0% 0% 0% 50% 2009 +100% 2.61% 2.28% −10.02% 12.59% 1.97% −26.61% −3.2% 2.41 8 42 61 80
4 0% 0% 0% 0% 2009 + age 1.82% 1.55% −4.07% 5.92% 1.40% −11.90% −1.4% 2.39 55 51 49 37
61 −100% −25% 0% 0% 2009 2.12% 1.35% −3.89% 6.64% 1.96% −12.18% 1.2% 2.42 57 61 54 25
21 0% −25% 0% 0% 2009 2.03% 1.34% −3.86% 6.38% 1.81% −11.92% 0.5% 2.42 58 62 55 27
42 −100% 0% 0% 0% 2009 +50% 2.31% 1.91% −6.77% 9.29% 1.88% −19.00% −1.5% 2.40 43 52 53 58
43 −100% 0% 0% 0% 2009 +100% 2.83% 2.36% −9.86% 12.87% 2.27% −26.85% −2.3% 2.42 29 47 58 75
6 0% 0% 0% 50% 2009 1.47% 1.21% −3.89% 5.39% 1.14% −10.81% −1.2% 2.39 40 56 60 55
41 −100% 0% 0% 0% 2009 1.71% 1.32% −3.72% 5.68% 1.44% −11.07% −0.4% 2.39 62 63 62 40
3 0% 0% 0% 0% 2009 +100% 2.72% 2.36% −9.86% 12.56% 2.06% −26.57% −3.1% 2.41 34 54 63 79
2 0% 0% 0% 0% 2009 +50% 2.19% 1.91% −6.76% 8.98% 1.68% −18.70% −2.3% 2.39 53 55 59 69
1 0% 0% 0% 0% 2009 1.61% 1.33% −3.69% 5.37% 1.25% −10.75% −1.2% 2.39 64 64 64 52
55 −100% 0% 25% 50% 2006 0.68% −0.07% −0.70% 1.96% 0.85% −2.55% 2.5% 2.41 67 65 65 53
75 −100% −25% 25% 50% 2006 0.88% −0.06% −0.79% 2.52% 1.16% −3.18% 3.8% 2.42 71 68 67 47
15 0% 0% 25% 50% 2006 0.63% −0.06% −0.70% 1.78% 0.73% −2.39% 1.9% 2.41 68 66 66 57
35 0% −25% 25% 50% 2006 0.84% −0.06% −0.78% 2.38% 1.07% −3.04% 3.3% 2.42 72 69 68 49
70 −100% −25% 25% 0% 2006 1.06% 0.09% −0.56% 2.50% 1.29% −3.09% 3.7% 2.43 79 75 69 38
30 0% −25% 25% 0% 2006 1.02% 0.09% −0.54% 2.36% 1.21% −2.95% 3.3% 2.42 78 76 70 42
25 0% −25% 0% 50% 2006 0.25% −0.13% −0.37% 1.04% 0.45% −1.23% 1.9% 2.37 65 67 71 67
50 −100% 0% 25% 0% 2006 0.86% 0.08% −0.48% 1.94% 0.98% −2.47% 2.4% 2.41 75 73 72 51
65 −100% −25% 0% 50% 2006 0.32% −0.13% −0.42% 1.29% 0.58% −1.51% 2.7% 2.38 66 70 74 63
10 0% 0% 25% 0% 2006 0.81% 0.08% −0.47% 1.76% 0.87% −2.30% 1.9% 2.41 74 74 73 54
20 0% −25% 0% 0% 2006 0.44% 0.03% −0.13% 1.03% 0.60% −1.13% 1.9% 2.38 73 77 75 62
60 −100% −25% 0% 0% 2006 0.51% 0.03% −0.18% 1.28% 0.73% −1.41% 2.6% 2.38 76 78 76 60
45 −100% 0% 0% 50% 2006 −0.08% −0.16% −0.25% 0.34% 0.06% −0.40% 1.0% 2.35 69 71 77 74
5 0% 0% 0% 50% 2006 −0.20% −0.16% −0.25% 0.01% −0.16% −0.11% 0.0% 2.34 70 72 78 78
40 −100% 0% 0% 0% 2006 0.12% 0.00% 0.00% 0.33% 0.22% −0.30% 0.9% 2.35 77 79 79 73

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