Nontaxable income and necessary consumption: the Rousseau’s paradox of fiscal egalitarianism
AbstractThe traditional concept of a strict minimum of necessary consumption and nontaxable income equal for all taxpayers embedded in most current income-tax systems is the result of a paradox of fiscal egalitarianism. The paper shows that substituting the traditional notion of a strict minimum of nontaxable income (Surplus Income Tax Method) for a scheme of growing personal allowances to meet the amounts of necessary consumption required by the different living standards of the taxpayers (Discretionary Income Tax Method) generates an income-tax scheme more progressive than the traditional one. In the paper we also show that this alternative proposal for nontaxable incomes generates an after-tax income distribution less unequal (Lorenz dominance) and superior in terms of social welfare (Atkinson, 1970).
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 32900.
Date of creation: 11 Aug 2011
Date of revision:
nontaxable income; necessary consumption; progressivity; tax burden; income distribution;
Find related papers by JEL classification:
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
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"On the Equitability of Progressive Taxation,"
95-25, C.V. Starr Center for Applied Economics, New York University.
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- Moyes, Patrick, 2003. "Redistributive effects of minimal equal sacrifice taxation," Journal of Economic Theory, Elsevier, vol. 108(1), pages 111-140, January.
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