Tax Progressivity, Public Debt, and Growth in a Neo‐Kaleckian Model

ABSTRACT We develop a neo‐Kaleckian growth‐and‐distribution model featuring two classes of workers and a progressive income tax. Two fiscal closures are considered: balanced budgets and deficit financing via public debt. We study the responses to shocks, including changes in functional income distribution, and assess how tax progressivity alters demand and accumulation regimes. Outcomes hinge on the interaction between class‐specific saving‐rate differentials and tax progressivity. Hence, redistribution and tax‐reform policies should be designed to match the economy's context and underlying saving behavior, rather than following a one‐size‐fits‐all rule.