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Assessing the Performance of an Income Tax

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  • DUCLOS, Jean-Yves

Abstract

An indicator of the performance of a tax (and/or benefit) system in generating a high level of social welfare is proposed. Under standard assumptions on the form of the admissible social welfare functions, the indicator is shown to be increasing in the progressivity of the system. It is also increasing in the degree of aversion towards inequality when the tax system is progressive. Unlike most indices of tax progressivity, the indicator has the attractive feature of being an explicit function of the shape of social welfare preferences. Using household data from 1985 Britain, we then ask: (i) What can the performance of constant residual progression be? (ii) Relative to a proportional system, what is the performance of existing or proposed tax and benefit systems? (iii) How can we approximate the average residual progression of unevenly progressive tax and benefit systems?

Suggested Citation

  • DUCLOS, Jean-Yves, 1994. "Assessing the Performance of an Income Tax," Cahiers de recherche 9402, Université Laval - Département d'économique.
    • Handle: RePEc:lvl:laeccr:9402
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    File URL: http://www.ecn.ulaval.ca/w3/recherche/cahiers/1994/9402.ps
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    Cited by:

    1. Duclos, Jean-Yves & Jalbert, Vincent & Araar, Abdelkrim, 2000. "Classical Horizontal Inequity and Reranking: an Integrated Approach," Cahiers de recherche 0002, Université Laval - Département d'économique.
    2. Muhammad Haseeb & Kate Vyborny, 2016. "Imposing institutions: Evidence from cash transfer reform in Pakistan," CSAE Working Paper Series 2016-36, Centre for the Study of African Economies, University of Oxford.
    3. DUCLOS, Jean-Yves, 1995. "Measuring Progressivity and Inequality," Cahiers de recherche 9525, Université Laval - Département d'économique.
    4. Duclos, Jean-Yves & Jalbert, Vincent & Araar, Abdelkrim, 2003. "Classical Horizontal Inequity and Reranking: an Integrating Approach," Cahiers de recherche 0306, CIRPEE.
    5. Jean-Yves Duclos & Peter Lambert, "undated". "A Normative Approach to Measuring Classical Horizontal Inequity," Discussion Papers 97/3, Department of Economics, University of York.

    More about this item

    Keywords

    Progressivity; redistribution; inequality; social welfare;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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