Taxes and benefits
Research articles · Aug 31, 2017
A tax-benefit model for Austria (AUTAX): Work incentives and distributional effects of the 2016 tax reform Michael Christl, Monika Köppl-Turyna, Dénes Kucsera
Independent Researcher, Austria
Volume 10(2) Summer 2017
Cite as: M. Christl, M. Köppl-Turyna, D. Kucsera; 2017; A tax-benefit model for Austria (AUTAX): Work incentives and distributional effects of the 2016 tax reform ; International Journal of Microsimulation; 10(2); 144–176. doi: 10.34196/ijm.00160
Abstract This study introduces a tax-benefit model based on administrative data for Austria (AUTAX) that can be used for the ex ante and ex post evaluation of reforms of personal income taxation and social benefits. We analyze the effects of the 2016 Austrian tax reform ex ante and concentrate on the effects on the distribution of net income and on work incentives. Our results show that the changes to the tax brackets have slightly increased inequality, and the middle- and high-income earners profited most. This effect has been significantly lowered by an increase in the negative income tax for low-income earners. By calculating average effective tax rates (AETRs) as well as marginal effective tax rates (METRs) along the whole income distribution in our model, we discuss changes on work incentives on the extensive but also on the intensive margin. We show that the 2016 tax reform positively affected the work incentives on the extensive and the intensive margin for higher income groups. The additional change in the negative income tax had only an impact on the extensive margin of low-income earners. These low-income earners are usually part-time workers, therefore giving a higher incentive to work part-time but no additional incentive to increase working hours. We show that a decrease in social security contributions instead of an increase in the negative income tax for low-income earners would lead to an increase in both the extensive and the intensive margin.
This article contains 7 figures and 23 tables.
Figures Figure 1. Distributions of the realized and the simulated values for net wage income. Figure 2. Annual net income increase of the 2016 tax reform. Figure 3. Distribution of net wage income before and after the 2016 tax reform. Figure 4. 2016 tax reform – Incentives on the extensive margin (AETR) and intensive margin (METR). Figure 5. Policy options – Incentives for low wage incomes on the extensive (AETR) and intensive margin (METR). Figure 6. Policy options – Incentives for middle wage incomes on the extensive (AETR) and intensive margin (METR). Figure A1. Tax rates in different tax reforms. Tables Table 1. The tax system in 2015.
(a) Recurrent wage income tax rates.
Tax base(EUR)
Tax rate
0 – 11,000
0%
11,000 – 25,000
36.5%
25,000 – 60,000
42.21%
> 60,000
50%
(b) Tax rates for special payments.
Tax base(EUR)
Tax rate
0 – 620
0%
620 – 25,000
6%
25,000 – 50,000
27%
50,000 – 83,333
35.75%
> 83,333
50%
Table 2. Tax rates for recurrent wage in 2016.
Tax base (EUR)
Tax rate
0 – 11,000
0%
11,000 – 18,000
0%
18,000 – 31,000
35%
31,000 – 60,000
42%
60,000 – 90,000
48%
90,000 – 1,000,000
50%
> 1,000,000
55%
Table 3. Lump-sum allowances and tax credits.
Old system
New system
(EUR)
Tax credits:
employee tax credit
54
-
deductible amount for travel expenses
291
400
pensioner tax credit
400
400
Lump-sum allowances:
advertising expense lump-sum
132
132
extra charge lump-sum
60
60
Table 4. Summary statistics (annual data).
Variable
Mean
Std. Dev.
Obs.
(EUR)
Gross wage
26,512.47
28,273.13
65,535
Special payments (paragraph 67 (1–2) of the ESt)a
3,437–61
3,284.93
65,535
Social security and other contributions
3,411.15
3,415.68
65,535
Other wage income (paragraph 67 (3–8) of the ESt)b
375.38
4,722.25
65,535
Tax base
18,982.57
21,216.19
65,535
Total wage tax
4,036.57
9034.34
65,535
Table 5. The simulation model.
Gross wage income
Recurrent wage income special payments (13. and 14. payment)
+ additional wage (except 13. and 14.)
- social security contributions on recurrent income (see Table A.1 )
- lump-sum commuter allowance
- social security contributions on special payments
- other job-related allowances
- non-job-related allowances
= taxable recurrent income (tax base)
= taxable special payments (tax base)
- income tax (see Table 2 )
- income tax
+ tax credits
on special payments (see Table 1b )
= net wage income (recurrent wage income)
= net wage income (special payments)
Table 6. Comparison of annual gross wage incomes: wage tax statistics 2014 and EU-SILC 2015.
Percentile
Wage tax
EU-SILC
Difference
(EUR)
10
4,463
2,860
−35.9%
20
10,743
8,061
−25.0%
30
16,943
14,938
−11.8%
40
22,420
20,774
−7.3%
50
27,714
26,612
−4.0%
60
32,704
31,903
−2.4%
70
38,367
38,265
−0.3%
80
46,483
45,809
−1.4%
90
61,317
59,943
−2.2%
mean
32,208
30,858
−4.2%
Table 7. Monthly ceilings for social security contributions, 2016.
Old system
New system
(EUR)
Social security income cap
4,750
4,860
Social security income threshold
416
416
Table 8. Summary statistics – simulated values (annual).
Variable
Mean
Std. Dev.
N
(EUR)
Wage tax
4,036.6
9,034.3
65,535
Wag tax (sim)
4,025.2
9,233.0
65,535
Net wage income
19,064.8
17,442.6
65,535
Net wage income (sim)
18,928.1
17,249.5
65,535
Table 9. Correlation realized values and simulated values.
Wage tax
Net income
Apprentices
0.8508
0.9969
Blue-collar workers
0.9742
0.9979
White-collar workers
0.9931
0.9976
Civil servants
0.9905
0.9961
Public-contract staff
0.9853
0.9956
Civil-servant pensioners
0.9918
0.9972
Pensioners
0.9897
0.9971
Individuals with care allowance
1.0000
1.0000
Other individuals
0.9873
0.9975
Total
0.9922
0.9977
Table 10. Inequality measures.
Inequality measure
Net income
Simulated net income
Gini coefficient
0.40911
0.40706
Theil index (GE(a), a = 1)
0.31261
0.31107
Atkinson inequality measures (eps = 1)
0.35335
0.35734
Table 11. Changes in tax and social security revenues in 2016.
Old system
New system
(MEUR)
Total wage tax revenues
27,644
23,451
Net tax revenues
−4,193
Social security contributions
23,912
24,039
Net social security contributions
127
Table 12. Average annual net income by social groups.
Old system
New system
Difference
Women
14,504
14,920
416
(2.87%)
Men
24,107
24,942
836
(3–47%)
Pensioners
16,346
16,835
490
(2.99%)
Employees
20,673
21,362
689
(3.33%)
Female employees
16,511
17,021
510
(3.09%)
Male employees
24,363
25,211
848
(3.48%)
Total
19,179
19,799
620
(3.23%)
Table 13. Average annual net income by social status.
Old system
New system
Difference
Apprentices
7,255
7,627
372
(5.12%)
Blue-collar workers
14,616
15,075
459
(3.14%)
White-collar workers
25,112
25,940
828
(3.30%)
Civil servant
35,732
37,124
1,393
(3.90%)
Public contract staff
23,444
24,266
823
(3.51%)
Civil servant pensioner
29,850
31,058
1,208
(4.05%)
Pensioner
15,285
15,709
424
(2.77%)
Other individuals
8,927
9,145
218
(2.45%)
Total
19,179
19,799
620
(3.23%)
Table 14. Average annual net income by age.
Old system
New system
Difference
16 to 25 years
10,054
10,351
297
(2.96%)
26 to 35 years
18,260
18,884
624
(3.42%)
36 to 45 years
22,306
23,056
749
(3.36%)
46 to 55 years
25,133
25,972
838
(3.34%)
56 to 65 years
22,313
23,005
692
(3.10%)
66+ years
16,682
17,197
515
(3.09%)
Total
19,179
19,799
620
(3.23%)
Table 15. Inequality measures for 2016.
Inequality measures
Old system
New system
Gini coefficient
0.40606
0.41005
Theil index (GE(a), a = 1)
0.30688
0.31050
Atkinson inequality measures (ε = 1)
0.45917
0.46408
Table 16. Annual net wage income by deciles.
Old system
New system
Difference
1st decile
735
735
0
(0.00%)
2nd decile
3,905
3,912
7
(0.18%)
3rd decile
8,704
8,730
26
(0.30%)
4th decile
12,684
12,710
26
(0.20%)
5th decile
16,081
16,468
387
(2.40%)
6th decile
19,177
19,942
765
(3.99%)
7th decile
22,303
23,185
882
(3.95%)
8th decile
25,841
26,902
1,061
(4.11%)
9th decile
30,954
32,337
1,383
(4.47%)
10th decile
51,400
53,066
1,667
(3.24%)
Table 17. Theil decomposition by tax status (taxpayer or not).
Old system
New system
Total
0.3069
0.3105
Within
0.1398
0.1377
Between
0.1671
0.1728
Table 18. Theil decomposition by social status, working time, age groups and gender.
(a) by social status
(b) by working time
Old system
New system
Old system
New system
Total
0.3069
0.3105
0.3069
0.3105
Within
0.2521
0.2551
0.2526
0.2548
Between
0.0547
0.0554
0.0543
0.0557
(c) by age groups
(d) by gender
Old system
New system
Old system
New system
Total
0.3069
0.3105
0.3069
0.3105
Within
0.2718
0.2752
0.2872
0.2903
Between
0.0351
0.0353
0.0197
0.0202
Table 19. Costs of the policy proposals.
Old system
New system
Proposals
SSC1
SSC2
(MEUR)
Wage tax revenue
23,451
24,006
23,830
SSC revenue
24,039
22,389
22,883
Additional wage tax revenue
556
379
Loss in SSC
−1,649
−1,155
Total costs
−370
−1,094
−776
Table 20. Impact of policy options on wage income deciles.
Old system
New system 400 EUR NIT
Proposals
SSC1
SSC2
(EUR)
1st decile
780
+16
(2.07%)
+7
(0.92%)
+8
(0.97%)
2nd decile
3,980
+196
(4.92%)
+51
(1.28%)
+52
(1.32%)
3rd dec1le
8,771
+243
(2.78%)
+122
(1.40%)
+126
(1.43%)
4th dec1le
12,715
+164
(1.29%)
+162
(1.27%)
+167
(1.31%)
5th dec1le
16,081
+391
(2.43%)
+529
(3.29%)
+535
(3.33%)
6th dec1le
19,177
+765
(3.99%)
+925
(4.82%)
+932
(4.86%)
7th dec1le
22,303
+882
(3.95%)
+1,066
(4.78%)
+1,075
(4.82%)
8th dec1le
25,841
+1,061
(4.11%)
+1,287
(4.98%)
+1,297
(5.02%)
9th dec1le
30,954
+1,383
(4.47%)
+1,647
(5.32%)
+1,590
(5.14%)
10th dec1le
51,400
+1,668
(3.24%)
+2,075
(4.04%)
+1,672
(3.25%)
Table 21. Inequalitymeasures and Theil decomposition of policy options.
New system 110 EUR NIT
New System 400 EUR NIT
Proposals
SSC1
SSC2
Gini coefficient
0.405
0.406
0.408
0.407
Theil Total
0.305
0.306
0.308
0.307
Theil Within
0.140
0.137
0.137
0.136
Theil Between
0.166
0.168
0.171
0.171
Table A1. Social security contributions.
HI
PI
UI
add. taxes
Total
2015
other individuals
3.82%
10.25%
3.00%
1.00%
18.07%
apprentices
3.95%
10.25%
3.00%
-
17.20%
blue-collar workers
3.95%
10.25%
3.00%
1.00%
18.20%
white-collar workers
3.82%
10.25%
3.00%
1.00%
18.07%
civil servant
4.10%
11.80%
3.00%
1.00%
19.90%
public contract staff
3.82%
10.25%
3.00%
1.00%
18.07%
civil servant pensioner
5.10%
10.25%
-
-
15.35%
pensioner
4.90%
10.25%
-
-
15.15%
individual with care allowance
4.90%
10.25%
-
-
15.15%
2016
other individuals
3.87%
10.25%
3.00%
1.00%
18.12%
apprentices
1.67%
10.25%
1.20%
-
13.12%
blue-collar workers
3.87%
10.25%
3.00%
1.00%
18.12%
white-collar workers
3.87%
10.25%
3.00%
1.00%
18.12%
civil servant
4.10%
11.75%
3.00%
1.00%
19.85%
public contract saff
3.87%
10.25%
3.00%
1.00%
18.12%
civil servant pensioner
5.10%
10.25%
-
-
15.35%
pensioner
5.10%
10.25%
-
-
15.35%
individual with care allowance
5.10%
10.25%
-
-
15.35%
Table A2. Independent 2-group Mann-Whitney U Test.
W
p-value
2,152,840,096
0.4286
