Impact of Taxes and Subsidies on Social Wealth Distribution: By Agent-Based Modeling

Abstract

With the booming of computer science, computer simulation is becoming more and more prevalent in studying realistic and complex economic problems. This study adopts agent-based modeling to interpret the impact of taxation and subsidies on social distribution. The classic simple economy model created by Wilensky is expanded. Moreover, in order to apply the model to the field of social distribution better, a simple tax subsidy model and a progressive tax model are created. After comparison and analysis, we find that when there is a serious gap between the rich and the poor in society, simple tax subsidy policy and progressive taxation policy are both beneficial to improve social wealth distribution, as expected, progressive taxation policy becomes more effective. This study can be a supplement to the traditional empirical analysis on wealth distribution. It also fully reflects the effectiveness of tax subsidy policy, especially progressive tax policy. Our research has certain guiding significance for policy makers. The government should make full use of taxation and subsidies to narrow the gap between the rich and the poor. It is necessary to actively improve the tax system and adopt appropriate tax standards, which helps to achieve the best trade-off between improving social equity and improving economic efficiency.