Taxes can also serve as social policy, according to IBRE

The tax system of a country can serve not only as means of fundraising in order to finance government expenditures, but also as a social policy, said the researcher of the Applied Economics department of the Brazilian Institute of Economics (FGV/IBRE), Érica Diniz.
Institucional
14 Janeiro 2014

Depending on how it is defined, the tax system of a country can serve not only as means of fundraising in order to finance government expenditures, but also as a social policy, said the researcher of the Applied Economics department of the Brazilian Institute of Economics (FGV/IBRE), Érica Diniz.

According to the economist, there's the tendency to ignore the potential of the tax system to reduce inequalities inside households. In her technical studies, Érica took as reference income taxes in countries where couples can choose to make their income tax return jointly or individually. In the United States, for example, 97% of couples choose the joint option because they generally pay fewer taxes that way, she says. Thus, according to Érica, the system opens an opportunity for spouses to interact, which may impact in their roles - a mechanism neglected by social planners.

In another study, the researcher identified that, if the impact is favorable for women, this gain in utility can be turned into benefits for the family. Empirical studies indicate that mothers tend to allocate more resources in their children?s education and nourishment she recalls.

Érica argues that if the public policy planners take the interactions that occur in a family into account - which technically means not considering couples as a single agent, but two people with different preferences-, they may help reduce the differences in income distribution within households. Taking this into consideration in a serious or explicit manner can assist in the design of tax systems, which may give more power to women, reflecting in the welfare of children and the results of social policies such as health and education, she concluded.

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