Given a settled reduction in the present level of tax revenue, and by exploring a very large combinatorial space of tax structures, in this paper we employ a genetic algorithm in order to determine the 'best' structure of a real world personal income tax that allows for the maximization of the redistributive effect of the tax, while preventing all taxpayers being worse off than with the present tax structure. We take Italy as a case study.JEL Codes: C63, C81, H23, H24

In this paper a method for analysing the fairness of an income tax system when portioning the population into heterogeneous socio-economic groups is proposed. The equitable tax system is defined by the three axioms given by Kakwani and Lambert (1998) and, as they suggest, inequity is evaluated by the negative influences on the redistributive effect of the tax associated with axiom violations. Measuring the extent of axiom violations among households belonging to different groups, we improve the Kakwani and Lambert analysis, which is able to detect only the existence of overall inequities. We propose a method that allows for evaluation of the contribution of each group to the overall inequity. Moreover, the adopted method enables disentangling the directions of violations. The obtained results allow us to judge how axiom violations discriminate among groups in their reciprocal relationships. An application to the 2010 Italian income tax reveals that inequities disproportionately penalize the household typologies. More precisely, unfairness affects households with children more severely than the other household groups. JEL Codes: C81, H23, H24

In this paper we develop the first (static) microsimulation model aimed at studying the distributive impact of housing taxation on Italian households. We use as input data those provided by the Bank of Italy from its Survey on Households Income and Wealth, and discuss specific problems arising in the evaluation of cadastral income and of the Property Tax base. Our estimates of the distribution of taxpayers are very close to the Ministry of Finance official statistics; hence, our model can be seen as a reliable tool to evaluate the current distribution of housing taxation and the impact of potential tax reforms. Our simulations suggest that both Property Tax and Waste Management Tax show a moderate regressive impact with respect to household gross income, whilst the Personal Income Tax on dwellings other than the main residence is progressive. We then provide an application of our model, to study the Property Tax reform in 2008. Our findings show that all households owning the main residence gain from the 2008 reform, but tax cuts are mostly concentrated on the top three deciles of household equivalent gross income, so that the richest benefit most.

Abstract. The presence of extensive housing subsidies characterises the current Italian tax systems as inefficient. In this paper, we study whether inefficiency is the price to be paid to improve equity, by assessing the distributive impact of housing taxation on households wellbeing. We concentrate on the Personal Income Tax (PIT) on the main residence, and compare current provisions of the Tax Code with alternative approaches, which consider the imputed rent (IR) from owner-occupied dwelling, and would make the tax system neutral with respect to the allocation of wealth among different assets. Holding revenues constant at the current level, we assess the distributional consequences of the IR approach under several alternative scenarios. Our results suggest that the current tax system is just as inefficient as it is inequitable. In particular, by including IR from owner-occupied dwellings as a component of the PIT gross income, we find that overall inequality is reducing, while contemporaneously increasing efficiency in the allocation of wealth. Moreover, considering changes in tax liabilities for individual taxpayers, we show that taxing imputed rents will favour the young and penalise the elderly. JEL Codes: H24, D31

In this paper we present a first attempt to develop a representative and flexible static tax-benefit microsimulation model, based on an exact match among a representative sample survey of the Italian income and living conditions in 2009-2010, provided by the Italian Institute of Statistics, and corresponding personal income tax returns, as well as cadastral data of the real estate properties of each individual, provided by the Department of Finance of the Italian Ministry of Economy and Finance on the same tax year. This static taxbenefit model can evaluate tax revenue and the redistributive impact of property and personal income taxation based on income types and levels actually declared with details of tax deductions. It should allow more reliable and detailed results compared to those based only on survey data and incomes declared to interviewers. JEL: C81, H23, H24