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Measuring Income Tax Discrimination

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  • Nanak C. Kakwani
  • Peter J. Lambert

Abstract

We propose a procedure for measuring the effect of systematic discrimination in the income tax. Different socioeconomic groups are assumed to face different tax schedules. We show that a welfare loss is caused by the group specificity of schedules, the dollar value of which is our measure of discrimination. Defining vertical equity as the dollar value of the tax system's welfare superiority over an equal yield flat tax, discrimination equates to a loss in vertical equity. The Australian income tax is found to discriminate against wage and salary earners, causing a roughly 1% loss of social welfare in 1984. © 1999 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Nanak C. Kakwani & Peter J. Lambert, 1999. "Measuring Income Tax Discrimination," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 27-31, February.
    • Handle: RePEc:tpr:restat:v:81:y:1999:i:1:p:27-31
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/003465399767923782
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    Cited by:

    1. Paul Allanson, 2007. "Classical Horizontal Inequities in the Provision of Agricultural Income Support," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(4), pages 656-671.
    2. Paul Allanson & Benedetto Rocchi, 2008. "A comparative analysis of the redistributive effects of agricultural policy in Tuscany and Scotland," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, vol. 86(1), pages 35-56.
    3. Essama-Nssah, B., 2008. "Assessing the redistributive effect of fiscal policy," Policy Research Working Paper Series 4592, The World Bank.
    4. Sahrbacher, Amanda, 2012. "Impacts of CAP reforms on farm structures and performance disparities: An agent-based approach," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 65, number 65.

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