Progressive tax reform in OECD countries: Opportunities and obstacles

The substantial increases in the disparity of wealth and income distribution over the last decades, in combination with the need for tax increases due to the budgetary stress experienced since the Great Recession, have led to calls for progressive tax reforms in many OECD countries. In their article, the authors provide a critical assessment of the standard arguments and complement them with a macroeconomic perspective. In their view there is more room for manoeuvre for national governments to increase the progressivity of the tax system and to raise additional revenue than is often suggested. They start with an overview of the regressive taxation trends since the 1980s and show that despite some changes there are no signs of a comprehensive trend reversal, precisely because of the allegedly strong efficiency/equity trade-off that supposedly does not allow for such changes. They then scrutinize the standard wisdom regarding the negative economic effects of progressive tax reform. Finally, they introduce a macroeconomic perspective into their analysis and draw some conclusions concerning future tax policies on the national and international level.