Sara Torregrosa Hetland
Senior lecturer
Income Taxes and Redistribution in the Early Twentieth Century
Author
Summary, in English
This paper studies the developments in the income taxes of Sweden, the United Kingdom, and the United States during the first half of the twentieth century. We present the evolution of marginal and average effective tax rates, number of taxpayers, and income tax due over the whole income distribution, and calculate the corresponding indices of progressivity and redistribution.
Our results show that redistribution through the income tax increased during the period, but with varying intensity and mechanisms. During World War I this was a joint effect of increases in the amount of revenue collected (average effective tax rate) and progressivity, whereas during World War II revenue increased again but progressivity diminished, as the tax incorporated more low- and middle-income taxpayers. The income tax in the United Kingdom was always the most redistributive of the three, and after 1945 also the one that remained most progressive.
Our results show that redistribution through the income tax increased during the period, but with varying intensity and mechanisms. During World War I this was a joint effect of increases in the amount of revenue collected (average effective tax rate) and progressivity, whereas during World War II revenue increased again but progressivity diminished, as the tax incorporated more low- and middle-income taxpayers. The income tax in the United Kingdom was always the most redistributive of the three, and after 1945 also the one that remained most progressive.
Department/s
- Growth, technological change, and inequality
Publishing year
2021
Language
English
Publication/Series
Lund Papers in Economic history
Issue
2021:224
Full text
Document type
Working paper
Topic
- Economic History
Keywords
- Taxation
- Redistribution
- Progressivity
- Income tax
- World Wars
- H23
- H24
- N42
- N44
Status
Published
Project
- Taxing for the welfare state: public finances and progressivity in the rise of social spending (1910-1970)
- Taxing for the welfare state: progressivity in the rise of social spending (1910-1970)