The Winner Takes It All? the New Personal Income Taxation and Family-Based Tax Allowances in Hungary Since 2010

An important line of social policies of the current Hungarian government has been the expansion of income of better-off families and the shrinking protection of poor families with the expectation that increased resources for better-off families would boost fertility rates among them. The central tool to reach this aim has been the reduction of the personal income tax (PIT) rate of the better off and the introduction of a 16 % flat PIT, besides the dramatic increase of family tax allowances for “large” families. Meanwhile, the tax allowance of low-income earners has been ceased and formerly universal family allowance (also received by “non-employed” families) became tightened and devalued. Thus there has been a visible shift from cash-transfers towards the more hidden, “fiscal” distribution of welfare. What are the consequences of these measures? Besides presenting national data on the tendencies of income inequalities, child poverty and fertility rates, this paper intends to answer this question through cases of micro-simulation providing a more detailed insight into the gender and class effects of family-based tax allowance system on different household-types.