Nontaxable income and necessary consumption: the Rousseau’s paradox of fiscal egalitarianism
The traditional concept of a strict minimum of necessary consumption and nontaxable income equal for all taxpayers embedded in most current income-tax systems is the result of a paradox of fiscal egalitarianism. The paper shows that substituting the traditional notion of a strict minimum of nontaxable income (Surplus Income Tax Method) for a scheme of growing personal allowances to meet the amounts of necessary consumption required by the different living standards of the taxpayers (Discretionary Income Tax Method) generates an income-tax scheme more progressive than the traditional one. In the paper we also show that this alternative proposal for nontaxable incomes generates an after-tax income distribution less unequal (Lorenz dominance) and superior in terms of social welfare (Atkinson, 1970).
|Date of creation:||11 Aug 2011|
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- Mitra, Tapan & Ok, Efe A., 1997.
"On the Equitability of Progressive Taxation,"
Journal of Economic Theory,
Elsevier, vol. 73(2), pages 316-334, April.
- Young, H Peyton, 1990. "Progressive Taxation and Equal Sacrifice," American Economic Review, American Economic Association, vol. 80(1), pages 253-66, March.
- Moyes, Patrick, 2003. "Redistributive effects of minimal equal sacrifice taxation," Journal of Economic Theory, Elsevier, vol. 108(1), pages 111-140, January.
- Keen, Michael & Papapanagos, Harry & Shorrocks, Anthony, 2000. "Tax Reform and Progressivity," Economic Journal, Royal Economic Society, vol. 110(460), pages 50-68, January.
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