Are Commodity Taxes Regressive? Evidence from Sweden

The distributional consequences of commodity taxes have become more important as industrialized countries have started to raise more revenue using these taxes. In this paper the distributional consequences of commodity taxes are evaluated using both disposable income and total expenditure as measures of household well-being. Using Swedish household expenditure data from 1988 and 1992, I find that the overall effect of commodity taxation has been to redistribute welfare from the poor to the rich. I find that almost all individual taxes are regressive, but only a few are significantly redistributive - the taxes on energy, food and consumer goods. Furthermore, the redistributive effect of energy taxation increased sharply after the 1990-91 tax reform.