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Is An Inequality-Neutral Flat Tax Reform Really Neutral?

Author

Listed:
  • Juan Prieto Rodríguez

    (Universidad de Oviedo and Instituto de Estudios Fiscales)

  • Juan Gabriel Rodríguez

    (Universidad Rey Juan Carlos de Madrid and Instituto de Estudios Fiscales)

  • Rafael Salas

    (Universidad Complutense de Madrid and Instituto de Estudios Fiscales)

Abstract

. Let us assume a revenue- and inequality-neutral flat tax reform shifting from a graduated-rate tax. Is this reform really neutral in terms of the income distribution? Traditionally, there has been a bias toward the inequality analysis, forgetting other relevant aspects of the income distribution. This kind of reforms implies a set of composite transfers, both progressive and regressive, even though inequality remains unchanged. This paper shows that polarization is a useful tool for characterizing this set of transfers caused by inequality-neutral tax reforms. A simulation exercise illustrates how polarization can be used to discriminate between two inequality-neutral tax alternatives.

Suggested Citation

  • Juan Prieto Rodríguez & Juan Gabriel Rodríguez & Rafael Salas, "undated". "Is An Inequality-Neutral Flat Tax Reform Really Neutral?," Working Papers 29-04 Classification-JEL , Instituto de Estudios Fiscales.
    • Handle: RePEc:hpe:wpaper:y:2004:i:29
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    2. Juan Prieto-Rodríguez & Juan Gabriel Rodríguez & Rafael Salas, "undated". "Interactions Inequality-Polarization: Characterization Results(*)," Working Papers 15-05 Classification-JEL , Instituto de Estudios Fiscales.

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    Keywords

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    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D39 - Microeconomics - - Distribution - - - Other
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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