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Should the Rich be Taxed More? The Fiscal Inequality Coefficient

Author

Listed:
  • John Hatgioannides
  • Marika Karanassou
  • Hector Sala

Abstract

This article holistically addresses the effective (relative) income tax contribution of a given income (or, wealth) group. The widely acclaimed standard in public policy is the absolute benefaction of a given income group in filling up the fiscal coffers. Instead, we focus on the ratio of the average income tax rate of an income group divided by the percentage of national income (or wealth) appropriated by the same income group. In turn, we develop the Fiscal Inequality Coefficient which compares the effective percentage income tax payments of pairs of income (or wealth) groups. Using data for the United States, we concentrate on pairs such as the Bottom 90% versus Top 10%, Bottom 99% versus Top 1%, and Bottom 99.9% versus Top 0.1%. We conclude that policy makers with a strong social conscience should re-evaluate the progressivity of the income tax system and make the richest echelons of the income and wealth distributions pay a fairer and higher tax.

Suggested Citation

  • John Hatgioannides & Marika Karanassou & Hector Sala, 2019. "Should the Rich be Taxed More? The Fiscal Inequality Coefficient," Journal of Economic Issues, Taylor & Francis Journals, vol. 53(3), pages 879-887, July.
    • Handle: RePEc:mes:jeciss:v:53:y:2019:i:3:p:879-887
    DOI: 10.1080/00213624.2019.1646624
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    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

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