Interaction of Income Distribution, Taxes and Economic Growth

The impact of fiscal policies on economic activities is one of the most important issues in both theory and practice. In this paper, we analyze economic growth and income distribution effects of tax and also the impact of inequality on economic growth in Iran and some selected East Asian countries. For this, we use panel data regression in the period of 1990-2006. The Results denote that the impact of goods and services tax on inequality and growth is insignificant, but the ratios of tax on income, profits and capital gains have positive and significant effects on Gini index and growth. International trade tax has a negative effect on growth. We also find evidence of a positive impact of income inequality on growth.