Markus Poschke, Associate Professor at McGill University, CIRANO researcher and Fellow presented the highlights of the CIRANO report «Should Quebec raise consumption taxes?» on March 17, 2022. Report co-authored with David Leung, Assistant Professor at National Taiwan University. Dalibor Stevanonic, Associate Professor at the Université du Québec à Montréal (ESG UQAM), Fellow and main researcher of the Economic and Fiscal Policies theme moderated the presentation.
The researchers studied the effects of four tax reforms using a life-cycle model with overlapping generations and heterogeneous agents in the presence of idiosyncratic risk to labor and capital income under a complex tax system. The model adequately replicates the joint empirical distributions of income, wealth and tax payments. In an economy with a highly progressive personal income tax, a revenue-neutral shift from taxes to consumption taxes increases savings and output. This policy particularly benefits those with low levels of wealth relative to their income. Several reforms increase aggregate income, despite small increases in inequality.
