The effect on household income of government taxation and expenditure in 1988, 1998, 2007 and 2010

Abstract

Governments change the resources available to households through both spending and taxation. This article examines the extent to which the government redistributes from high-to low-income households, and how this has changed since 1988. As well as covering market outcomes and the effects of personal income tax and cash benefits on the disposable incomes of households, the distribution of indirect taxes and of government expenditure on in-kind social services is calculated. The results reveal how government affects the distribution of post-tax income received by households, when income is defined considerably more broadly than usual. This article extends Treasury’s previous fiscal incidence study of 1988 and 1998 using 2007 and 2010 data.1