Impact of Income Taxes on Wages. A Non Parametric Analysis of the Mexican Case by Gender

Abstract The objective of this work is to measure the effect of income tax on wages in Mexico with respect to gender and working hours. A microsimulation of the tax burden of formal wage earners was carried out, using a non-parametric method to avoid assuming a functional relationship of variables through the use of the Gaussian kernel function. The results show that the tax burden only falls on 60% of salaried employees. Men bear a higher tax burden than women and an increase in working hours does not cause a significant increase in the payment of the tax. It is recommended to establish strategies in favor of better salaries that allow an increase in collection. The limitation of the study is that it does not consider the incidence of corporate or self-employed taxes. The originality of this is to offer an alternative measure of income tax considering wages and working hours without establishing a priori conditions between them. The conclusion is that a low-wage labor market will not contribute to the strengthening of public income.