Abstract
We perform the first comprehensive fiscal incidence analyses inBrazil and theU.S., including direct cash and food transfers, targeted housing and heating subsidies, public spending on health and education, and taxes on personal income, payroll, corporate income, property, and expenditures. The countries share a number of similarities that make the comparison interesting, including high levels of inequality given their levels of development, high inequality of opportunity, large and racially diverse populations, and similar sizes of government. TheU.S. achieves higher redistribution through direct taxes and transfers, primarily becauseBrazil underutilizes personal income taxes and keeps its progressive cash and food transfer programs small, while its larger transfer programs are less progressive. When public spending on health and non‐tertiary education is added to income using the government cost approach, however, the two countries achieve similar levels of redistribution.
Highlights
How much do the Western Hemisphere’s two largest economies and most populous countries redistribute through social spending and taxes? the United States has an income per capita four times as large as Brazil’s, the countries share similarities that make this comparison interesting
This paper presents the first direct comparison of fiscal incidence in Brazil and the United States, using household survey data and a combination of allocation techniques including direct identification, microsimulation, inference, and imputation
Such comparisons are of interest because income inequality is high in both countries given their levels of development
Summary
How much do the Western Hemisphere’s two largest economies and most populous countries redistribute through social spending and taxes? the United States has an income per capita four times as large as Brazil’s, the countries share similarities that make this comparison interesting. The two countries each have high levels of economic inequality relative to their level of development; when the US had a GDP per capita similar to Brazil’s today, its level of inequality was similar to that observed in Brazil today (Plotnick et al, 1998) In both countries, one key determinant of income inequality is the unequal distribution of human capital associated with high rates of school incompletion and, to some extent, race (Goldin and Katz, 2008, Ñopo, 2012). One key determinant of income inequality is the unequal distribution of human capital associated with high rates of school incompletion and, to some extent, race (Goldin and Katz, 2008, Ñopo, 2012) Both countries have high inequality of opportunity (Brunori et al, 2013), low levels of intergenerational mobility (Jäntti et al, 2006, Corak, 2013), and a fairly similar profile with respect to income polarization (Ferreira et al, 2013, figure F5.1C).
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