Breaking Down Inequality: Can Taxes Really be Redistributive?

This study examines the redistributive effects of tax system compositions across 107 countries from 1990 to 2020, using multiple econometric techniques and robustness checks to assess both short- and long-term dynamics. By stratifying countries by income levels and incorporating measures of tax effort, progressivity, and inequality quartiles, the analysis provides a detailed view of fiscal redistribution. Results show strong temporal persistence and relative support for the median voter hypothesis in high- and middle-income economies. Economic growth and informality negatively affect redistribution, while unemployment has income-specific impacts. Tax structure is central: PIT and SSC are most effective in high- and middle-income countries, while CIT and indirect taxes dominate in low-income economies. Structural progressivity enhances redistribution across all groups, and tax effort is particularly impactful in low-income countries. These findings highlight the importance of appropriate tax policy and fiscal capacity in achieving sustained redistribution.