Tax benefits of personal income tax and its redistributive impacts

Abstract

The objective of this work is to analyze the distributed impacts of some exempt income and deductions in the Personal Income Tax (IRPF). To this end, a database using the POF 2008/09 association methodology with information from the Federal Revenue for the base year 2008 was created. The methodology was to identify those favored by the tax benefits and the resulting expenses, so as to make a counterfactual of the impact on the Gini of the absence of these benefits. The findings point to highly concentrated tax benefits at the top (an exemption from profits and dividends and pensions for people with chronic diseases), intermediaries (deductions for health expenses) and less concentrated ones (an exempt portion for pensions and pensions and deductions for education expenses). The extinction of tax benefits would increase the power to reduce Gini via IRPF by 3.30% (education), 9.92% (health) and, with a notable impact of 55% for the implementation of progressive taxation of profits and dividends.