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Measurement of effective tax progression

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  • Poddar, Satya N.
  • Genser, Bernd

Abstract

The paper first considers two properties of measures of effective progression, proportional yield neutrality and linear decomposability. It is shown that decomposability implies yield neutrality but not the converse. The concept of sensitivity of a measure to progression in various ranges of the income spectrum is then defined. This concept, when applied to the commonly used group of Lorenz curve based measure, shows them all to be sensitive only in the middle income range. A new class of measures is, therefore, introduced so that particular measures with any desired pattern of sensitivity can be constructed. The paper concludes with empirical illustrations for Canada and the U.S. The importance of separating measures of effective progression from measures of income redistribution is stressed, by showing that progressive taxes do not unambigously reduce the inequality of post tax incomes. -- Der Beitrag behandelt zwei Eigenschaften effektiver Progressionsmaße, die Invarianz gegemiber proportionaien Steuerbelastungsänderungen (proportional yield neutrality) und die lineare Dekomposition (linear decomposability). Es läßt sich zeigen, daß die Invarianzeigenschaft aus der Dekomposition folgt, jedoch nicht umgekehrt. Weiter wird das Konzept der Sensitivität eines Progressivitätsmaßes gegenüber Progressionseffekten in unterschiedlichen Intervallen der Einkommensskala formalisiert. Anhand dieses Konzeptes zeigt sich, daß die üblichen an Lorenzkurven anknvipfenden Progressivitätsmaße nur in einem mittleren Einkommensbereich sensitiv sind. Es wird daher eine neue Klasse von.Progressivitätsmaßen vorgestellt, die es erlaubt, beliebige Sensitivitätsmuster entlang der Einkommensskala festzulegen. Abschließend werden einige empirische Resultate fur Kanada und die USA angegeben. Dabei zeigt sich einmal mehr die Notwendigkeit, effektive Progressivitätsmaße von Maßen der Einkommensumverteilung zu unterscheiden, da progressive Steuerlastverteilungen nicht immer zu einer Verringerung der Disparität der Einkommen nach Steuern führen.

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Bibliographic Info

Paper provided by University of Konstanz, Department of Economics in its series Discussion Papers, Series I with number 224.

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Date of creation: 1986
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Handle: RePEc:zbw:kondp1:224

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Postal: D-78457 Konstanz
Phone: +49 7531 88 2314
Fax: +49-7531-88-2145
Web page: http://www.wiwi.uni-konstanz.de/
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  1. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198281931, October.
  2. Hemming, R. & Keen, M. J., 1983. "Single-crossing conditions in comparisons of tax progressivity," Journal of Public Economics, Elsevier, Elsevier, vol. 20(3), pages 373-380, April.
  3. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
  4. Davies, David G, 1980. "Measurement of Tax Progressivity: Comment," American Economic Review, American Economic Association, American Economic Association, vol. 70(1), pages 204-07, March.
  5. C. P. Khetan & S. N. Poddar, 1976. "Measurement of Income Tax Progression in a Growing Economy: The Canadian Experience," Canadian Journal of Economics, Canadian Economics Association, vol. 9(4), pages 613-29, November.
  6. Lambert, Peter J, 1985. "On the Redistributive Effect of Taxes and Benefits," Scottish Journal of Political Economy, Scottish Economic Society, vol. 32(1), pages 39-54, February.
  7. Suits, Daniel B, 1977. "Measurement of Tax Progressivity," American Economic Review, American Economic Association, American Economic Association, vol. 67(4), pages 747-52, September.
  8. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 87(345), pages 71-80, March.
  9. Suits, Daniel B, 1980. "Measurement of Tax Progressivity: Reply," American Economic Review, American Economic Association, American Economic Association, vol. 70(1), pages 211, March.
  10. Steven M. Rock, 1983. "Measurement of Tax Progressivity: Application," Public Finance Review, , vol. 11(1), pages 109-120, January.
  11. Edward C. Kienzle, 1982. "Post-Fisc Distributions of Income: Measuring Progressivity With Application To the United States," Public Finance Review, , vol. 10(3), pages 355-368, July.
  12. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, Elsevier, vol. 2(3), pages 244-263, September.
  13. Kakwani, Nanak C, 1977. "Applications of Lorenz Curves in Economic Analysis," Econometrica, Econometric Society, Econometric Society, vol. 45(3), pages 719-27, April.
  14. John P. Formby & David Sykes, 1984. "State Income Tax Progressivity," Public Finance Review, , vol. 12(2), pages 153-165, April.
  15. Charles Blackorby & David Donaldson, 1984. "Ethical Social Index Numbers and the Measurement of Effective Tax-Benefit Progressivity," Canadian Journal of Economics, Canadian Economics Association, vol. 17(4), pages 683-94, November.
  16. Lambert, Peter J, 1984. "Non-equiproportionate Income Growth, Inequality, and the Income Tax," Public Finance = Finances publiques, , , vol. 39(1), pages 104-18.
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