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| Sarah Godar |
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| Achim Truger |
Over the past decades, the redistributive effect of the tax system in most OECD countries has been substantially and deliberately weakened by tax policies which reduce the tax burden on wealth. Personal and corporate income tax rates have been massively reduced and special provisions privilege capital income. At the same time, rich individuals and corporations have increasingly used legal and illegal tax evasion by shifting income or profits to low tax countries. If this trend continues, the disparities in income distribution will continue to rise. In the long run the financing of the welfare state will be seriously threatened.However the budgetary stress experienced since the Great Recession, together with substantial increases in disparities in the distribution of income and wealth, have put progressive tax reforms back on the agenda in many OECD countries. There are some signs that the downward trend in redistributive taxation may be coming to a halt (Godar/Paetz/Truger, 2014). A number of international institutions have also commented in a more or less progressive way on how to achieve fiscal consolidation through a socially acceptable tax reform.
