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What Makes the Personal Income Tax Progressive? A Comparative Analysis for Fifteen OECD Countries

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  • Adam Wagstaff

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  • Eddy van Doorslaer

Abstract

In this paper, we explore the roles of tax credits, rate structures, allowances and deductions in determining the overall progressivity of net income tax liabilities in fifteen OECD countries. Three clusters emerge: (i) the rate-structure countries, Australia, France, Italy, the Netherlands and Spain, where the rate effect is the dominant (but not the only) source of progressivity of gross and net tax liabilities; (ii) the allowance countries, the English-speaking countries other than Australia, where allowances are the dominant source of progressivity; and (iii) the mixed structure countries, Belgium, Finland, Germany and Sweden, where roughly half of the progressivity of gross tax liabilities is attributable to the rate structure. Copyright Kluwer Academic Publishers 2001

Suggested Citation

  • Adam Wagstaff & Eddy van Doorslaer, 2001. "What Makes the Personal Income Tax Progressive? A Comparative Analysis for Fifteen OECD Countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(3), pages 299-316, May.
  • Handle: RePEc:kap:itaxpf:v:8:y:2001:i:3:p:299-316
    DOI: 10.1023/A:1011268209860
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    References listed on IDEAS

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    1. Sophia Delipalla & Harry Papapanagos, 1996. "The Distributional Superiority of Tax Credits," Studies in Economics 9608, School of Economics, University of Kent.
    2. Lambert, Peter J & Pfahler, Wilhelm, 1992. "Income Tax Progression and Redistributive Effect: The Influence of Changes in the Pre-tax Income Distribution," Public Finance = Finances publiques, , vol. 47(1), pages 1-16.
    3. Pfahler, Wilhelm, 1990. "Redistributive Effect of Income Taxation: Decomposing Tax Base and Tax Rates Effects," Bulletin of Economic Research, Wiley Blackwell, vol. 42(2), pages 121-129, April.
    4. Michael Keen & Harry Papapanagos & Anthony Shorrocks, 1996. "Progressivity Effects of Structural Income Tax Reforms," Studies in Economics 9612, School of Economics, University of Kent.
    5. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
    6. Kakwani, Nanak C & Podder, N, 1976. "Efficient Estimation of the Lorenz Curve and Associated Inequality Measures from Grouped Observations," Econometrica, Econometric Society, vol. 44(1), pages 137-148, January.
    7. Zandvakili, Sourushe, 1994. "Income Distribution and Redistribution through Taxation: An International Comparison," Empirical Economics, Springer, vol. 19(3), pages 473-491.
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