Income Redistribution through the Tax System

Abstract

Japan experienced a drastic increase in land prices in the late 1980s. During this period the general sense of inequality increased, especially due to the increased disparity in possession of financial assets and land. The landowners enjoyed an inflated value of their assets, while the renters suffered because of the hike in rental prices. Tachibanaki and Yagi (1994) estimated the contribution of various income sources, including imputed rent, to inequality in total income distribution by decomposition analysis. They also investigated the effect of the Japanese tax system, namely, the separated tax system on income redistribution. The results obtained in their decomposition analysis indicate the relatively weak effect of the separated tax system on the redistribution of income from imputed rent.