Tax Reform 2015-16 and Bracket Creep 2010-2019. A Microsimulation Analysis for Austria

In applying the Austrian Tax Transfer Microsimulation Model ATTM we show that the wage and income tax reform of 2016, which will reduce yearly tax revenues by almost € 5 billion, will only partially compensate for the cumulated additional tax burden due to bracket creep since the previous tax reform in 2009-10. The temporary reduction of the tax burden in 2016 will evaporate in just a few years if the parameters of the tax system are not continuously adjusted to the inflation rate. Furthermore, bracket creep leads to possibly unintended negative distributional effects, increasing the relative tax burden in the lower and middle strata of the income distribution and reducing it in its upper part.