Roger Thayer Stone Center For Latin American Studies

Tulane University

The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico and Peru: A Synthesis of Results

Working Document: The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico and Peru: A Synthesis of Results
Nora Lustig, George Gray-Molina, Sean Higgins, Miguel Jaramillo, Wilson Jiménez, Veronica Paz, Claudiney Pereira, Carola Pessino, John Scott and Ernesto Yañez
Tulane University, August 20, 2012

Abstract
We apply a standard tax and benefit incidence analysis to estimate the impact on inequality and poverty of direct taxes, indirect taxes and subsidies, and social spending (cash and food transfers and in-kind transfers in education and health). The extent of inequality reduction induced by direct taxes and transfers is rather small (2 percentage points on average) especially when compared with that found in Western Europe (15 percentage points on average). What prevents Argentina, Bolivia and Brazil from achieving similar reductions in inequality is not the lack of revenues but the fact that they spend less on cash transfers- especially transfers that are progressive in absolute terms- as a share of GDP. Indirect taxes result in that net contributors to the fiscal system start at the fourth, third and even second decile on average, depending on the country. When in-kind transfers in education and health are added, however, the bottom six deciles are net recipients. The impact of transfers on inequality and poverty reduction could be higher if spending on direct cash transfers that are progressive in absolute terms is increased, leakages to the nonpoor are reduced and coverage of the extreme poor by direct transfer programs is expanded.

The Impact of Taxes and Social Spending on Inequality and Poverty in Argentina, Bolivia, Brazil, Mexico and Peru: A Synthesis of Results

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Every Friday from 10am-12pm CDT, The Latin American Library and Stone Center are co-hosting a virtual work-along for Latin Americanist graduate students to support each other in their research and writing goals. The Zoom meeting has two break-out options: participants may choose to troubleshoot research and methodological questions with an LAL librarian and/or work towards their writing objectives alongside a community of their peers. We hope you will join us when you can!

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This summer educator institute is the third institute in a series being offered by Tulane University, The University of Georgia and Vanderbilt University. This series of institutes is designed to enhance the presence of Central America in the K-12 classroom. Each year, participants engage with presenters, resources and other K-12 colleagues to explore diverse topics in Central America with a focus on people and the environment.

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