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IPS264 Oliver H. et al.
results in taxable income. Based on taxable income, either the cantonal or
federal level tax rate is applied. To calculate the actual canton, municipality
and church taxes, the tax determined based on the cantonal tax rate is
multiplied by a factor which communities and cantons can choose for the
simplified short-term management of their tax revenue to avoid the more
complex legal process of adjusting the rates.
We find that more than two thirds of the tax burden is carried by canton
and municipality tax, while the federal tax level has a much lower volume and
the church tax is relatively minor.
For the present analyses, the deductions have been classified into six
categories. Social deductions consist of deductions that are related to the
family and health situation (second earner deduction, child deductions, health
care costs, etc.). Work-related expenses include miscellaneous necessary costs
related to employment, like the costs of commuting, weekly stays and training
costs. Expenses relating to real estate like maintenance and interest costs are
classified as real estate and interest costs. Further deductions are extra-
mandatory payments to the pension scheme as well as costs of asset
management and insurance costs (Deductions related to assets and
insurance). Finally, alimonies to partners and donations can be deducted
(Alimonies and charity). All other deductions are classified as other deductions.

Decomposition of redistributive effects
Reynolds & Smolensky (1977) suggest a straightforward concept to
measure the effect of redistribution by taxes. This is, as can be seen in formula
(1), the difference of a Gini coefficient of pre-tax incomes (Gx) and post-tax
incomes (Gx-t ).
(1) = - −

The present study separates the effects for single types of taxes by a
sequential approach which was already used in other studies (Mahler & Jesuit,
2006; Wang & Caminada, 2011; Wang et al., 2014). Therefore, RS is depicted
into three components:

= - = ∗ −

−
1−
Ki is the Kakwani Index of progressivity (Kakwani, 1977) of the i-th tax, ti is
the tax rate and RRi is the horizontal reranking effect of tax i. Atkinson (1979)
describes this reranking as the “horizontal inequity of the tax system”. As these
effects might indeed be intended, horizontal effects are not discussed in the
context of justice in this paper. Nonetheless, horizontal effects are calculated,
as they are important in the context of the effects of deductions.
Deductions have an indirect effect on the distribution of disposable
incomes as they modify the tax rate applied. To determine the effects of
deductions, the tax assessment procedure of the canton of Aargau was

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