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Evaluating the design of the tax system

Awarded: NOK 2.8 mill.

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2012 - 2015

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The current application provides a careful empirical investigation of key aspects of the design of the Norwegian tax system. The purpose is to inform the public and policymakers on how the tax system can be (re)designed to foster equality and insure again st income shocks, while minimizing tax distortions. In three different projects we will examine the following topics: 1. Short run perspectives on taxation of labour income. - What are the consequences in terms of labour supply, income distribution and poverty of introducing in-work-benefits to the Norwegian tax-benefit system? 2. Long run perspectives on income taxation. - To what extent can individuals and households insulate their consumption from income shocks through smoothing and private risk shar ing? - How does the tax-transfer system perform in a life-cycle perspective in terms of insurance against income shocks, redistribution and distortions to economic behaviour? 3. Taxation of business income and business assets: implications for risk, econo mic stability and distribution - To what extent do the large changes in the portfolio compositions of Norwegian households after the tax reform in 2006 reflect, respectively, lock-in effects and distorted risk incentives? - To what extent does the wealth tax on personally owned business assets force closely held firms to distribute dividends to finance the tax? All three projects are empirical analyses based on Norwegian micro data.

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