Let us assume a revenue- and inequality-neutral flat tax reform shifting from a graduated-rate tax. Is this reform really distributional neutral? Traditionally, there has been a bias toward the inequality analysis, forgetting other relevant aspects of the income distribution. This kind of reforms implies a set of composite transfers, both progressive and regressive, even though inequality remains unchanged. This paper shows that polarization is a useful tool for characterizing this set of transfers caused by inequality-neutral tax reforms. A simulation exercise illustrates how polarization can be used to discriminate between two inequality-neutral tax alternatives.
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Find related papers by JEL classification: D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement D39 - Microeconomics - - Distribution - - - Other H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
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