Author : Nak Nyeon Kim (Professor of Department of Economics, Dongguk University)

Abstract

This paper estimates the earned income tax burden of different income groups, top 0.01%, 0.1%, 1%, 5%, 10%, and bottom 90% during 1963-2011. Under current income tax system, income tax burden has a rising trend even with the reduction of tax rate and the expansion of deductions. Under the progressive tax system, the increase in nominal income results in bracket creep which shifts taxpayers to the brackets with higher tax rates. Bracket creep causes income tax burden to rise without explicit increase in tax rate, and may weaken the progressivity of income tax system. This paper decomposes the change in income tax burden into two parts due to tax system revision and bracket creep, and also decomposes the change in tax burden by bracket creep into two parts due to inflation and real income increase. This bracket creep effect has been partly or excessively offset by tax revision realized by the reduction of tax rates or expansion of deductions, so that net tax burden differs not only across income groups but also across periods.