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On Measuring Inequity in Taxation Among Groups of Income Units

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  • Maria Giovanna Monti
  • Simone Pellegrino
  • Achille Vernizzi

Abstract

type="main"> In this paper a method for analyzing the fairness of an income tax system when portioning the population into heterogeneous socio-economic groups is proposed. The equitable tax system is defined by the three axioms given by Kakwani and Lambert in 1998 and, as they suggest, inequity is evaluated by the negative influences on the redistributive effect of the tax associated with axiom violations. Measuring the extent of axiom violations among households belonging to different groups, we improve the Kakwani and Lambert analysis, which is able to detect only the existence of overall inequities. We propose a method that allows for evaluation of the contribution of each group to the overall inequity. Moreover, the adopted method enables disentangling the directions of violations. The obtained results allow us to judge how axiom violations discriminate among groups in their reciprocal relationships. An application to the 2010 Italian income tax reveals that inequities disproportionately penalize the household typologies. More precisely, unfairness affects households with children more severely than the other household groups.

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  • Maria Giovanna Monti & Simone Pellegrino & Achille Vernizzi, 2015. "On Measuring Inequity in Taxation Among Groups of Income Units," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(1), pages 43-58, March.
    • Handle: RePEc:bla:revinw:v:61:y:2015:i:1:p:43-58
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    References listed on IDEAS

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    2. Lars Osberg, 2017. "On the Limitations of Some Current Usages of the Gini Index," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63(3), pages 574-584, September.
    3. Maria Alessandra Antonelli & Valeria De Bonis, 2021. "Economic Poverty: Does the Break-Up of Families Matter?," Social Sciences, MDPI, vol. 10(6), pages 1-20, June.
    4. Corrado Benassi & Emanuela Randon, 2021. "The distribution of the tax burden and the income distribution: theory and empirical evidence," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(3), pages 1087-1108, October.
    5. Simone Pellegrino & Achille Vernizzi, 2018. "Decomposing the Redistributive Effect of Taxation to Reveal Axiom Violations," Working papers 049, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    6. Alina Jędrzejczak & Dorota Pekasiewicz, 2020. "Changes in Income Distribution for Different Family Types in Poland," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 26(2), pages 135-146, May.
    7. Paolo Caro, 2020. "Decomposing Personal Income Tax Redistribution with Application to Italy," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 18(1), pages 113-129, March.

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