This note will describe recent trends in income inequality in both advanced and developing economies and how tax and expenditure policies have impacted on these trends. It will discuss how tax and expenditure policies should be designed to bring about a more equitable distribution of income, as well as to protect the most vulnerable populations during periods of fiscal consolidation.

This paper is an excerpt from Inequality and Fiscal Policy. The sizeable increase in income inequality experienced in advanced economies and many parts of the world since the 1990s and the severe consequences of the global economic and financial crisis have brought issues on equity and distribution to the top of the policy agenda. The book delves into this discussion by analyzing fiscal policy and its link with inequality. Fiscal policy is the government’s most powerful tool for addressing inequality. It affects household consumption directly and indirectly. An important message of the book is that growth and equity are not necessarily at odds; with the appropriate mix of policy instruments and careful policy design, countries can in many cases achieve better distributional outcomes and improve economic efficiency. Country case studies demonstrate the diversity of challenges and the diverging ways to use fiscal policy for redistribution. The analysis presented in the book builds on work by IMF economists and leading academics.

The sizeable increase in income inequality experienced in advanced economies and many parts of the world since the 1990s and the severe consequences of the global economic and financial crisis have brought distributional issues to the top of the policy agenda. The challenge for many governments is to address concerns over rising inequality while simultaneously promoting economic efficiency and more robust economic growth. The book delves into this discussion by analyzing fiscal policy and its link with inequality. Fiscal policy is the government’s most powerful tool for addressing inequality. It affects households ‘consumption directly (through taxes and transfers) and indirectly (via incentives for work and production and the provision of public goods and individual services such as education and health). An important message of the book is that growth and equity are not necessarily at odds; with the appropriate mix of policy instruments and careful policy design, countries can in many cases achieve better distributional outcomes and improve economic efficiency. Country studies (on the Netherlands, China, India, Republic of Congo, and Brazil) demonstrate the diversity of challenges across countries and their differing capacity to use fiscal policy for redistribution. The analysis presented in the book builds on and extends work done at the IMF, and also includes contributions from leading academics.

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This book aims to empirically and theoretically study how income inequality and demographic change affected fiscal policy and subsequent economic growth globally in the past decades from four perspectives. First, it briefly reviews the dynamic changes of income sources that contribute to inequality. Second, it distinguishes between income inequality induced by differences in labor productivity and income inequality induced by differences in capital income. Third, it briefly reviews the dynamic changes of tax composition in the age of demographic change. Last, it discusses the impacts of changes in age structure on the extent of taxes on income relative to expenditure. This book offers a comprehensive discussion to understand and analyze the reason, performance and challenge of fiscal policy and economic growth from the perspective of inequality and demographics.In addition to students, teachers and researchers in the areas of equity, demography, political economy and economic policy, this book is also of great interest to policy makers, planners and non-government agencies who are concerned with understanding and addressing poverty-related and aging-related issues in developed and developing countries.

It was a part of the wisdom of mainstream economics that in the early stages of development inequality would rise but as growth persisted, it would, eventually, decline. Early evidence seemed to suggest that this pattern would be borne out. But, as time passed and growth persisted, inequality continued to grow, casting doubt on the received wisdom. The aim of this two-volume book is to analyze the current state of global and regional inequality, dissect the phenomenal increase in inequality that we have seen occur in recent times, and better understand the complex relationship between inequality and development. The political instability and conflict that we see around the world, arguably, has connection to economic deprivation of large segments of society and the perception of marginalization. This two-volume work acquires a special significance in the light of these developments.

An acclaimed examination of how the American political system favors the wealthy—now fully revised and expanded The first edition of Unequal Democracy was an instant classic, shattering illusions about American democracy and spurring scholarly and popular interest in the political causes and consequences of escalating economic inequality. This revised, updated, and expanded second edition includes two new chapters on the political economy of the Obama era. One presents the Great Recession as a "stress test" of the American political system by analyzing the 2008 election and the impact of Barack Obama's "New New Deal" on the economic fortunes of the rich, middle class, and poor. The other assesses the politics of inequality in the wake of the Occupy Wall Street movement, the 2012 election, and the partisan gridlock of Obama’s second term. Larry Bartels offers a sobering account of the barriers to change posed by partisan ideologies and the political power of the wealthy. He also provides new analyses of tax policy, partisan differences in economic performance, the struggle to raise the minimum wage, and inequalities in congressional representation. President Obama identified inequality as "the defining challenge of our time." Unequal Democracy is the definitive account of how and why our political system has failed to rise to that challenge. Now more than ever, this is a book every American needs to read.

Edited by Nora Lustig, the Commitment to Equity Handbook: Estimating the Impact of Fiscal Policy on Inequality and Poverty (Brookings Institution Press and CEQ Institute-Tulane University, 2nd edition, 2022) is a unique manual on the theory and practical methods to estimate the impact of taxation and public spending on inequality and poverty. In addition, the second edition covers frontier topics such as alternative approaches to measure the redistributive effect of education, health, and infrastructure spending. Policymakers, social planners, and economists are provided with a step-by-step guide to applying fiscal incidence analysis, illustrated by country studies. The 2nd edition of the Handbook has two volumes. Volume 1 is comprised of Part I, Methodology, describes what a CEQ Assessment© is and presents the theoretical underpinnings of fiscal incidence analysis and the indicators used to assess the distributive impact and effectiveness of fiscal policy. Part II, Implementation, presents the methodology on how taxes, subsidies, and social spending should be allocated. It includes a step-by step guide to completing the CEQ Master Workbook©, a multi-sheet Excel file that houses detailed information on the country’s fiscal system and the results used as inputs for policy discussions, academic papers, and policy reports. Part III, “Applications,” presents applications of the CEQ framework to low- and middle-income countries and includes simulations of policy reforms. In this 2nd edition, chapters 1, 6, and 8 have been significantly updated and two new country studies have been added to Part III. Parts IV (updated), V (new), and VI (new) are available online only. Part IV contains the CEQ Assessment’s main tools. Part V includes the databases housed in the CEQ Data Center on Fiscal Redistribution. Part VI contains the CEQ Institute’s microsimulation tools. Volume 2 (new) includes a collection of chapters whose purpose is to expand the knowledge and methodological frontiers to sharpen even further the analysis of fiscal policy’s redistributive impact. Topics include: alternative approaches to value in-kind education and health services; alternative methods to evaluate spending on infrastructure; corporate taxes and taxation on capital incomes; inter-temporal fiscal incidence and the redistributive consequences of social insurance pensions; fiscal redistribution, macroeconomic stability and growth; and, the political economy of fiscal redistribution.

Top economists provide much-needed guidance--and some surprising conclusions--in response to rising public concerns about inequality in the U.S. tax system.