title: Do healthcare tax credits help poor-health individuals on low incomes?
abstract: In several countries, personal income tax permits tax credits for out-of-pocket healthcare expenditure. Tax credits benefit taxpayers at all income levels by reducing their net tax liability and modify the price of out-of-pocket expenditure. To the extent that consumer demand is price elastic, they may influence the amount of eligible healthcare expenditure for which taxpayers may claim a credit. These effects influence, in turn, income distributions and taxpayers' health status and therefore income-related inequality in health. Redistributive consequences of tax credits have been widely investigated. However, little is known about the ability of tax credits to alleviate health inequality. In this paper, we study the potential effects that tax credits for health expenses may have on income-related inequality in health status with reference to the Italian institutional setting. The analysis is performed using a tax-benefit microsimulation model that reproduces the personal income tax and incorporates taxpayers' behavioral responses to changes in tax credit rate. Our results suggest that the current healthcare tax credit design tends to favor the richest part of the population.
authors.affiliation: Department of Economics and Management, University of Pavia, via San Felice, 5/7, 27100, Pavia, Italy. cinzia.dinovi@unipv.it.|Health, Econometrics and Data Group, University of York, York, UK. cinzia.dinovi@unipv.it.|LCSR, National Research University Higher School of Economics, Moscow, Russian Federation. cinzia.dinovi@unipv.it.
authors.forename: Cinzia
authors.identifier: http://orcid.org/0000-0002-3536-5507
authors.initials: C
authors.lastname: Di Novi
authors.affiliation: Department of Economics, Ca' Foscari University of Venice, Venice, Italy.
authors.forename: Anna
authors.initials: A
authors.lastname: Marenzi
authors.affiliation: Department of Economics, Ca' Foscari University of Venice, Venice, Italy.
authors.forename: Dino
authors.initials: D
authors.lastname: Rizzi
mesh_terms: D054624:Health Status Disparities; D006801:Humans; D007182:Income; D007183:Income Tax; D011203:Poverty; D013660:Taxes; D014481:United States
keywords: Health inequality; Health-related tax credit; Personal income tax