Ashgate, 2009, 214 pp, pbk, 0 7546 7848 9, £35
For forty years Tony Atkinson has been at the forefront of tax-benefit modelling, and for over twenty years Holly Sutherland has been deeply involved in the development of tax-benefit models. It is a remarkable story of persistence and hard work in an important cause: the discovery of the effects of current and proposed tax and benefits systems, not just in the aggregate, but for individual households; and not just in theory but in relation to how money is actually earned and spent in the real world.
The immediate reason for the publication under review is the extension of the tax-benefit modelling software EUROMOD from a model built to handle the tax-benefit systems and datasets for the fifteen countries which constituted the European Union until 2004 into a version which can handle the systems and datasets of nineteen countries and soon of all twenty-seven of the current member states. Given the complexities of the twenty-seven different systems involved, and the added complexity of different datasets available for each member state, this is really quite a remarkable achievement. Those of us who were impressed at the way in which the early POLIMOD could process the UK’s Family Expenditure Survey data to tell us the difference which a change in a benefit level or in the structure of the benefits system would make to actual net earnings in a particular earnings decile can only marvel at software which will soon do that and more for all twenty-seven EU countries.
But to get back to the book: The first two historical chapters close with plans for the future which include the use of a Eurostat dataset rather than household surveys differently organised in different countries, and further expansion of the number of countries around the world which are now using modelling software based on EUROMOD’s structure. Then follow chapters which employ EUROMOD to study the effects of current tax-benefit systems on net incomes in nineteen EU countries, the effects which proposed flat tax schemes would have in Estonia, Hungary and Slovenia (the costs of the changes would be borne by lower income groups), the effects of alternative tax-benefit proposals on child poverty in Poland, the effects of reforming child allowances in Lithuania, and the effects of replacing in-work benefits with a revenue-equivalent tax-free labour income. (This chapter takes into account the likely effects of the current and proposed systems on labour market participation and finds that a tax-free labour income would increase labour market participation.)
The final chapter suggests that the payoff of the considerable investment which tax-benefit models represent should be maximised by making them as accessible as possible to a wide range of users. We can only agree.
The authors are to be congratulated on a most useful book, but even more on the model-building and research projects which it’s all about.