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Income Taxation and Equity

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  • Peter J. Lambert

    () (University of York)

Abstract

This paper exposes and explains the various ways in which value judgements can be instilled into an income tax system, or, if inherent in a pre-existing one, can be drawn out and understood. A putative EU-wide income tax, additional to the national income taxes of the Member States, is analysed. When the identification of equals is done using an appropriate "equivalent income function", and the equal treatment command modelled in terms of it, the resultant tax will in general be differentiated between countries. A supplementary command, "equal progression among equals", can be achieved if equals are defined as those at the same percentile point in the within-country distributions, and if these distributions differ in logarithms only by location and scale. Differentiated proportional taxes could even be equitable, the flat rate being higher in less unequal countries. The value judgements implicit in a given tax system can be exposed in terms of an equivalence scale which is in general "base dependent".

Suggested Citation

  • Peter J. Lambert, 2004. "Income Taxation and Equity," Working Papers 2004/4, Institut d'Economia de Barcelona (IEB).
  • Handle: RePEc:ieb:wpaper:307710art149
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    File URL: http://ieb.ub.edu/aplicacio/fitxers/307710ART149.pdf
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    References listed on IDEAS

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    1. Maria Cubel & Peter Lambert, 2002. "Progression-neutral income tax reforms and horizontal inequity," Journal of Economics, Springer, vol. 9(1), pages 1-8, December.
    2. Cutler, David M & Katz, Lawrence F, 1992. "Rising Inequality? Changes in the Distribution of Income and Consumption in the 1980's," American Economic Review, American Economic Association, vol. 82(2), pages 546-551, May.
    3. Alan J. Auerbach & Kevin A. Hassett, 2002. "A New Measure of Horizontal Equity," American Economic Review, American Economic Association, vol. 92(4), pages 1116-1125, September.
    4. 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.
    5. Maria Cubel & Peter Lambert, "undated". "A Regional Approach to Income Tax Policy," Discussion Papers 97/8, Department of Economics, University of York.
    6. Jean-Yves Duclos & Peter J. Lambert, 2000. "A normative and statistical approach to measuring classical horizontal inequity," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 87-113, February.
    7. 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.
    8. Dardanoni, Valentino & Lambert, Peter J., 2002. "Progressivity comparisons," Journal of Public Economics, Elsevier, vol. 86(1), pages 99-122, October.
    9. Sijbren Cnossen, 2002. "Tax Policy in the European Union: A Review of Issues and Options," CESifo Working Paper Series 758, CESifo Group Munich.
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    Citations

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    Cited by:

    1. Paolo Brunori & Flaviana Palmisano & Vito Peragine, 2014. "Income taxation and equity: New dominance criteria and an application to Romania," Working Papers 348, ECINEQ, Society for the Study of Economic Inequality.
    2. repec:krk:eberjl:v:1:y:2013:i:4:p:57-69 is not listed on IDEAS
    3. Maria Giovanna Monti & Simone Pellegrino & Achille Vernizzi, 2015. "On Measuring Inequity in Taxation Among Groups of Income Units," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(1), pages 43-58, March.
    4. Peter J. Lambert, 2007. "Positional equity and equal sacrifice: design principles for an EU-wide income tax?," Working Papers 0706, University of Otago, Department of Economics, revised Apr 2007.

    More about this item

    Keywords

    Equity; EU; Income tax;

    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
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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