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Identifying Tax Implicit Equivalence Scales

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  • Justin Van de Ven

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Abstract

This paper describes a simple and tractable method for identifying equivalence scales that reflect the value judgements implicit in a tax-benefit system. The approach depends on two identifying assumptions and a functional description for transfer payments that can be estimated using common micro-data. We use this approach to evaluate tax implicit equivalence scales for the UK tax-transfer system that applied in April 2009. The estimated tax implicit scales vary positively with tax unit size and generally decrease with gross earnings, consistent with recent estimates calculated on consumption data. We conclude by discussing potential applications for the proposed tax implicit scales.

Suggested Citation

  • Justin Van de Ven, 2015. "Identifying Tax Implicit Equivalence Scales," National Institute of Economic and Social Research (NIESR) Discussion Papers 444, National Institute of Economic and Social Research.
  • Handle: RePEc:nsr:niesrd:444
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    References listed on IDEAS

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    More about this item

    Keywords

    equivalence scale; taxation; horizontal equity;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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