IFS Working Paper (W16/17)

Mobility and the lifetime distributional impact of tax and transfer reforms

Date: 09 September 2016
Publisher: The IFS
JEL classification: JEL D31, H20, H24
DOI: 10.1920/wp.ifs.2016.1617

The distributional impact of proposed reforms plays a central role in public debates around tax and transfer policy. We show that accounting for realistic patterns of mobility in employment, earnings and household circumstances over the life-cycle greatly affects our assessment of the distributional effects of tax and transfer reforms. We focus on three reforms modelled in the UK context: (i) changes to out-of-work versus in-work benefits, (ii) adjustments to income tax rates, and (iii) reforms to indirect taxation. In all three cases, the long-run distributional impact differs to that implied by a standard crosssection analysis in important ways.