The inequality effects of a dual income tax system
AbstractThe overall inequality effects of a dual income tax (DIT) system, combining progressive taxation of labor income with proportional taxation of income from capital, are investigated. Simple examples show that correlations between distributions of wage and capital income, the degree of tax rate differentiation in the DIT, and reranking of tax-payers can be expected to complicate the analysis. We trace out what can be said definitively, obtaining sufficient conditions for unambiguous inequality reduction and identifying the nature of the implicit redistribution between labor and capital income which is involved, with the help of Norwegian income tax data.
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Bibliographic InfoPaper provided by Research Department of Statistics Norway in its series Discussion Papers with number 663.
Date of creation: Sep 2011
Date of revision:
Personal income tax; dual income tax; redistributive effect;
Find related papers by JEL classification:
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
This paper has been announced in the following NEP Reports:
- NEP-ACC-2011-10-01 (Accounting & Auditing)
- NEP-ALL-2011-10-01 (All new papers)
- NEP-LTV-2011-10-01 (Unemployment, Inequality & Poverty)
- NEP-PBE-2011-10-01 (Public Economics)
- NEP-PUB-2011-10-01 (Public Finance)
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