Is the tax system more redistributive now?
Is the tax system more or less redistributive in 2019 than in 2013? This question is answered by applying tax systems in the period 2013–2019 while keeping the distribution of pre-tax income in year 2019 fixed. In the past, we have used the same methodology to assess the redistribution of tax policy to the red-green government (2005–2013). In this report, the tax redistributive effect is analyzed for six years under the Solberg government. We focus on personal taxation and look at the effects via income taxes, wealth taxes and consumption taxes by applying Statistics Norway's tax simulation models − LOTTE-Skatt, LOTTE-Konsum and LOTTE-Arbeid.
When taking into account both changes in income and wealth tax, tax on consumption, and also changes in the labor supply, we conclude that the income inequality due to changes in the tax system has increased somewhat from 2013 to 2019. Looking more closely at how individual changes in income and wealth tax have contributed, we find that changes in wealth tax had virtually no redistributive effect on net income. This is because a substantial fraction of households with high wealth are associated with low current income, such that a relief in wealth tax has also accrued to some households placed at the bottom of the income distribution. If we instead rank according to net wealth, the relief is as expected greatest among those with the highest wealth. The single change that has contributed most to a weaker redistribution of income is the reduced rate of ordinary income, while the introduction of step tax and the adjustment of owner income have pulled in the opposite direction. Furthermore, it turns out that taking labor supply effects into account, to some extent further weakens the redistribution of income. Overall, as mentioned, we find that the tax system has become somewhat less redistributive in 2019 than in 2013, but it must be emphasized that the effect is very moderate.