In a joint study Andrei Polbin assessed the impact of the progressive tax scale on the russian economy

In a joint study with Margarita Martyanova, expert of the Presidential Academy, Andrei Polbin, Head of the Department of Mathematical Modeling of Economic Processes, the Gaidar Institute, assessed the impact of the progressive personal income tax scale on the economy. The results were published by the RBC.

In the article “Scenario-Based Assessment of the Macroeconomic Effects of Progressive Taxation in Russia,” the researchers analyzed 3 options of changes in the tax system that could lead to an increase, preservation or decrease in the tax burden on individuals. Different thresholds were considered for the increased tax rate with incomes of Rb30,000, Rb50,000 and Rb70,000 per month before tax. The base state (with which scenario calculations are compared) is the taxation of households’ labor income at a single rate of 13%.

The researchers came to the conclusion that in the group of scenarios suggesting an increase in personal income tax collections, GDP decreases in all options. Further, the implementation of a progressive tax system may reduce more efficient experts’ motivation to work, as they will try to work less. According to the article, “with an increase in the threshold, the extent of the decline in GDP decreases because a smaller share of households is subject to higher taxation and, accordingly, there is a smaller decline in labor supply.”