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The Inconsistency Between Measurement and Policy Instruments in Family Income Taxation

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  • Peter J. Lambert
  • Shlomo Yitzhaki

Abstract

There is an inconsistency between the way income tax progressivity is measured and the policy instruments typically used by the income tax authorities. This inconsistency leads to violation of Feldstein´s principle of horizontal equity and causes unintentional reranking among families of different sizes. Implications are considered. In particular, we provide a methodology for measuring the magnitude of the unintentional reranking in terms of forgone redistribution, and apply it to Israeli data.

Suggested Citation

  • Peter J. Lambert & Shlomo Yitzhaki, 2013. "The Inconsistency Between Measurement and Policy Instruments in Family Income Taxation," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 69(3), pages 241-255, September.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(201309)69:3_241:tibmap_2.0.tx_2-c
    DOI: 10.1628/001522108X671119
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    References listed on IDEAS

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    1. Bruno, Michael & Habib, Jack, 1976. "Taxes, family grants and redistribution," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 57-79.
    2. Ebert, Udo, 1997. "Social Welfare When Needs Differ: An Axiomatic Approach," Economica, London School of Economics and Political Science, vol. 64(254), pages 233-244, May.
    3. Udo Ebert, 2000. "Equivalizing Incomes: A Normative Approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(6), pages 619-640, December.
    4. Donaldson, David & Pendakur, Krishna, 2004. "Equivalent-expenditure functions and expenditure-dependent equivalence scales," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 175-208, January.
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    Cited by:

    1. Emanuela Raffinetti & Elena Siletti & Achille Vernizzi, 2017. "Analyzing the Effects of Negative and Non-negative Values on Income Inequality: Evidence from the Survey of Household Income and Wealth of the Bank of Italy (2012)," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(1), pages 185-207, August.

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    More about this item

    Keywords

    income tax; horizontal equity; allowance; exemption; child benefit;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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