Income tax progressivity and inflation during the world wars

Summary, in English

This paper studies the impact of inflation on income taxes in Sweden, the UK, and the United States during the world wars. As tax reforms were rising top marginal rates and reducing exemption thresholds, extraordinary levels of inflation eroded the real value of exemptions, brackets, and deductions. The micro-simulation of actual and alternative scenarios shows that inflation made the tax less progressive, particularly in Sweden during World War I and the UK during World War II. Nevertheless, its redistributive effect increased due to the related growth in tax revenue. Inflation contributed to transform a “class tax’’ into a “mass tax”.

• Author: Sara Torregrosa Hetland; Oriol Sabaté
• Department/s: Department of Economic History; Growth, technological change, and inequality
• Publishing year: 2022-08-01
• Language: English
• Pages: 311-339
• Publication/Series: European Review of Economic History
• Volume: 26
• Issue: 3
• Links: http://dx.doi.org/10.1093/ereh/heab020
• Document type: Journal article
• Publisher: Oxford University Press
• Topic: Economic History
• 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)
• ISBN/ISSN/Other: ISSN: 1474-0044