Tax reforms, social inequality and automatic stabilizers

Abstract

Numerous studies address the issue of tax reforms and their relationship to social inequality. However, the results are ambiguous or contradictory. Therefore, this article aims to bring more light to this issue by analyzing theoretically and practically, econometrically, the link between the subjects analyzed: fiscal reforms, automatic stabilization and social inequality in EU with 28 countries. In addition, the idea of tax reform has been simplified by analyzing the evolution of personal income tax rates in EU-28 countries, with only those with a higher progressivity to surprise the idea of automatic stabilization. However, the outcomes for selected countries from EU-28, although modest in terms of linkage intensity, confirm the starting hypothesis: increasing progressivity may support reducing social inequality and boosting economic growth.