Income Taxes and Redistribution in the Early Twentieth Century

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.

• Author: Sara Torregrosa Hetland; Oriol Sabaté
• Department/s: Growth, technological change, and inequality
• Publishing year: 2021
• Language: English
• Publication/Series: Lund Papers in Economic history
• Issue: 2021:224
• Full text: - 1 MB; Download statistics
• 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)