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On the equivalence between progressive taxation and inequality reduction

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  • Biung-Ghi Ju

    ()
    (Department of Economics, Korea University)

  • Juan D. Moreno-Ternero

    (Universidad de Malaga and CORE, Universite catholique de Louvain)

Abstract

We establish the precise connections between progressive taxation and inequality reduction, in a setting where the level of tax revenue to be raised is exogenously fixed and tax schemes are balanced. We show that, in contrast with the traditional literature on taxation, the equivalence between inequality reduction and the combination of progressivity and income order preservation does not always hold in this setting. However, we show that, among rules satisfying consistency and, either revenue continuity, or revenue monotonicity, the equivalence remains intact.

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Bibliographic Info

Paper provided by Institute of Economic Research, Korea University in its series Discussion Paper Series with number 0718.

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Length: 9 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:iek:wpaper:0718

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Keywords: progressivity; inequality reduction; income order preservation; consistency; taxation;

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  1. Young, H. P., 1988. "Distributive justice in taxation," Journal of Economic Theory, Elsevier, Elsevier, vol. 44(2), pages 321-335, April.
  2. Fellman, J, 1976. "The Effect of Transformations on Lorenz Curves," Econometrica, Econometric Society, Econometric Society, vol. 44(4), pages 823-24, July.
  3. Moulin, Herve, 2002. "Axiomatic cost and surplus sharing," Handbook of Social Choice and Welfare, Elsevier, in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 6, pages 289-357 Elsevier.
  4. Thon, Dominique, 1987. "Redistributive properties of progressive taxation," Mathematical Social Sciences, Elsevier, Elsevier, vol. 14(2), pages 185-191, October.
  5. Eichhorn, Wolfgang & Funke, Helmut & Richter, Wolfram F., 1984. "Tax progression and inequality of income distribution," Journal of Mathematical Economics, Elsevier, vol. 13(2), pages 127-131, October.
  6. Jakobsson, Ulf, 1976. "On the measurement of the degree of progression," Journal of Public Economics, Elsevier, Elsevier, vol. 5(1-2), pages 161-168.
  7. R. A. Musgrave & Tun Thin, 1948. "Income Tax Progression, 1929-48," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 56, pages 498.
  8. Kakwani, Nanak C, 1977. "Applications of Lorenz Curves in Economic Analysis," Econometrica, Econometric Society, Econometric Society, vol. 45(3), pages 719-27, April.
  9. Thomson, William, 2003. "Axiomatic and game-theoretic analysis of bankruptcy and taxation problems: a survey," Mathematical Social Sciences, Elsevier, Elsevier, vol. 45(3), pages 249-297, July.
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Cited by:
  1. Biung-Ghi Ju & Juan D. Moreno-Ternero, 2009. "Progressive and merging-proof taxation," Working Papers, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center 2009-7, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center.
  2. Yoichi Kasajima & Rodrigo Velez, 2011. "Reflecting inequality of claims in gains and losses," Economic Theory, Springer, Springer, vol. 46(2), pages 283-295, February.
  3. Carmen Herrero & Juan Moreno-Ternero & Giovanni Ponti, 2009. "On the adjudication of conflicting claims: an experimental study," Social Choice and Welfare, Springer, Springer, vol. 33(3), pages 517-519, September.
  4. BOSMANS, Kristof & SCHOKKAERT, Erik, . "Equality preference in the claims problem: a questionnaire study of cuts in earnings and pensions," CORE Discussion Papers RP, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) -2166, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. JU, Biung-Ghi & MORENO-TERNERO, Juan D., 2006. "Progressivity, inequality reduction and merging-proofness in taxation," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 2006075, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Kasajima, Yoichi & Velez, Rodrigo A., 2010. "Non-proportional inequality preservation in gains and losses," Journal of Mathematical Economics, Elsevier, vol. 46(6), pages 1079-1092, November.

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