Assessment of the Macroeconomic Effects of Changes in the Progressivity of the Taxation Scale within the Framework of the OLG Model

The subject of the study is the Russian income tax system. The purpose of the work is to evaluate the effects of changes in the degree of progressivity of the income tax scale on key macroeconomic variables. A stochastic model of general economic equilibrium with overlapping generations is constructed, where households consisting of two spouses make decisions about the volume of consumption and the number of hours worked by each spouse. The calibration of the model is based on econometric estimates of life cycle parameters built for Russia. Two scenarios were considered: transfers are fixed at the level of the baseline scenario, the entire budget surplus goes to government spending; government spending is fixed at the level of the baseline scenario, the entire budget surplus goes to transfers. Within the framework of each scenario, the overall economic equilibrium was estimated for different values of the parameter of the degree of progressiveness of the taxation scale. The results of the simulation analysis indicate the classic problem of compromise between fairness and efficiency of the tax system. It was found that as the degree of progressivity increases, inequality and output decrease in the first scenario, while in the case of the second scenario, the result turned out to be the opposite. In general, the change in macroeconomic parameters in response to the increasing degree of progressivity of the tax scale in Russia turned out to be significantly less than in other countries, due to, on the one hand, a weak labor supply response, and, on the other hand, a high degree of risk aversion, which is why the potential of tax and transfer policies as a tool in the fight against inequality in Russia appears to be moderate.