The Impact of wealth taxes on income distribution: Kónya panel causality analysis for nordic countries

Although taxes are primarily collected to serve a financial purpose, they have also been used for different purposes (social, political and economic) over time. The social purpose of taxes is to reduce inequality in income and wealth distribution. Wealth taxes are collected for the social purpose of taxes and provide income flow from high-income groups to low-income groups, thus reducing income and wealth inequality. The aim of the study is to reveal the impact of wealth taxes on income distribution. Scandinavian countries were selected as a sample and Kónya Panel Causality Analysis was conducted using the data from the 1995-2021 period of these countries. The analysis investigated whether wealth taxes in Scandinavian countries had an impact on income distribution. The selection of Scandinavian countries was influenced by the fact that these countries have good income distribution and that they have become a role model in terms of the economic situation they have reached over time. The data range was preferred because it constituted the widest time period obtained for the sample. In the study, wealth taxes in the OECD classification were used as the independent variable; the Gini coefficient was used as the dependent variable. As a result of the study, different findings were obtained in Scandinavian countries. Generally speaking, the results are insignificant for Denmark, Finland, Iceland, but significant for Norway and Sweden. In general, a positive effect was obtained in Norway (increase in income distribution inequality when there is an increase in tax), and a negative effect was obtained in Sweden (decrease in income distribution inequality when there is an increase in tax). No econometric study was conducted on the variables used in the analysis, and therefore it is thought that the study will contribute to the literature.