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Should the Rich Be Taxed More? The Fiscal Inequality Coefficient

Listed author(s):
  • Hatgioannides, John

    ()

    (City University London)

  • Karanassou, Marika

    ()

    (Queen Mary, University of London)

  • Sala, Hector

    ()

    (Universitat Autònoma de Barcelona)

This paper holistically addresses the effective (relative) income tax contribution of a given in-come (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 US, 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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 10978.

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Length: 15 pages
Date of creation: Aug 2017
Handle: RePEc:iza:izadps:dp10978
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  1. Thomas Piketty & Emmanuel Saez & Gabriel Zucman, 2016. "Distributional National Accounts: Methods and Estimates for the United States," NBER Working Papers 22945, National Bureau of Economic Research, Inc.
  2. Jon D. Wisman & James F. Smith, 2011. "Legitimating Inequality: Fooling Most of the People All of the Time," American Journal of Economics and Sociology, Wiley Blackwell, vol. 70(4), pages 974-1013, October.
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