The European Journal of Health Economics

, Volume 19, Issue 2, pp 293–307 | Cite as

Do healthcare tax credits help poor-health individuals on low incomes?

  • Cinzia Di Novi
  • Anna Marenzi
  • Dino Rizzi
Original Paper


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.


Personal income tax Health-related tax credit Health inequality 

JEL Classification

I10 I14 H24 



An earlier draft of this paper was presented at the annual meeting of the Italian Public Economic Associations, Lecce, Italy, and at the annual meeting of the Italian Health Economics Association, Bologna, Italy. The authors wish to thank the conference participants for their detailed and helpful comments. The authors in particular wish to thank Andrea Albarea for his assistance in gathering and processing the data. The paper benefitted from comments from Michele Bernasconi, Enrica Croda, Gianmaria Martini and Francesca Zantomio. The usual disclaimer applies.

Supplementary material

10198_2017_884_MOESM1_ESM.doc (179 kb)
Supplementary material 1 (DOC 179 kb)


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Copyright information

© Springer-Verlag Berlin Heidelberg 2017

Authors and Affiliations

  1. 1.Department of Economics and ManagementUniversity of PaviaPaviaItaly
  2. 2.Department of EconomicsCa’ Foscari University of VeniceVeniceItaly
  3. 3.Health, Econometrics and Data GroupUniversity of YorkYorkUK
  4. 4.LCSR, National Research University Higher School of EconomicsMoscowRussian Federation

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