Measurement Of Tax Progressivity Research Articles

Accounting for Cross-Country Differences in Intergenerational Earnings Persistence: The Impact of Taxation and Public Education Expenditure

I document a strong negative cross-country correlation between intergenerational earnings persistence and measures of tax progressivity - and level, and between intergenerational earnings persistence and public expenditure on tertiary education. To explain these correlations I then develop an intergenerational life-cycle model of human capital accumulation and earnings, which features, progressive taxation, public education expenditure, and borrowing constraints among the determinants of earnings persistence. I calibrate the model to US data and use it to decompose the contributions to earnings persistence from different model elements and to quantify how earnings persistence in the US changes as I introduce tax - and education expenditure policies from other countries. I find that individual investments in human capital account for 73% of the estimated intergenerational earnings persistence in the US. Taxation, through its impact on investments in human capital, can explain 50% of the variation between the US and 10 other countries, whereas borrowing constraints, which have received much attention in the literature, have a limited impact on earnings persistence.

Distributional Incidence of the Gasoline Tax in Chile (Incidencia Distributiva del Impuesto a las Gasolinas en Chile) (Spanish)

This paper estimates the distributional incidence of gasoline taxes in Chile, using the V and VI Family Budget Surveys for this purpose. Tax incidence is estimated based on income and expenditures distribution to consider potential differences between transitory and permanent income. As a measure of tax progressivity the Suits Index is estimated and confidence intervals of the index are obtained using bootstrapping, allowing then to statistically compare changes in tax incidence due to changes in tax rates. The results show that gasolines taxes are moderately progressive in Chile with higher progressivity with respect to expenditures than income. Finally, the simulation of a 42% decreased in the tax rate as the one implemented in 2008 show consistently that its effects in terms of incidence is to reduce the progressivity of the gasoline tax.

The effects of standardized tax rates, average tax rates, and the distribution of income on tax progressivity

This study examines the changes in US individual income tax progressivity over the 1986–2003 period using the indexes developed by [Kakwani, N.C., 1976. Measurement of tax progressivity: An international comparison. Economic Journal 87(March), 71–80]. Although progressivity over this time frame has generally been studied in the literature, we provide additional insights by decomposing the changes in index values to account for the effects of concurrent changes in the standardized tax rates, average tax rates, and the income distribution. The decomposition should prove to be particularly useful when different summary indexes lead to conflicting conclusions about progressivity changes, as is often the case. From a policy standpoint, we show that it is the standardized tax rates, a derivative of the legislated tax rates, which need to be monitored and managed to offset the negative progressivity effects of increasing before-tax income inequality.

The effects of progressive income taxation on job turnover

We examine whether the level of the income tax rate and the convexity of the income tax schedule affect job mobility, as measured by moving to a better job. While the predicted effect of the level of the tax rate is ambiguous, we predict that an increase in the convexity of the tax schedule decreases job search activity by taxing away some of the benefits of a successful job search. Using data from the Panel Study of Income Dynamics, we estimate that both higher tax rates and increased tax rate progressivity decrease the probability that a head of household will move to a better job during the coming year. Our estimates imply that a five-percentage-point reduction in the marginal tax rate increases the average probability of moving to a better job by 0.79 percentage points (a 8.0% increase in the turnover propensity) and that a one-standard-deviation decrease in our measure of tax progressivity would increase this probability by 0.86 percentage points (a 8.7% increase in the turnover propensity). This estimate is robust to sensitivity analysis examining the importance of different sources of identification and variation in estimated effects across subgroups in the population. Our estimated importance of tax policy for job turnover suggests a potential role in explaining the responsiveness of taxable income to marginal tax rates.

Measuring Tax Progressivity: Compatible Global and Local Indexes

This paper analyzes two complementary measures of tax progressivity. Relative Share Adjustment (RSA) is the ratio of after-tax to before-tax shares of income for particular groups. RSAg, a global measure, is the log of RSA averaged over all groups, weighted by group population. It is equal to the absolute change in inequality resulting from the tax, as measured by Theil's index of income inequality. Values for the indexes are computed through application of alternative tax functions to simulated lognormal income distributions. The results highlight the contrasts in the distributional effects of different tax structures of similar overall progressivity.

The Redistributive Effect of Direct Taxes: A Comparison of Six LIS Countries

The Luxembourg Income Study (LIS) is used to investigate the redistributive effects of direct taxes in six countries, Australia, Canada, Sweden, West Germany, the United States and the United Kingdom. Two periods are considered and comparisons are made among countries at different points in time and within countries across time. Lorenz curves are adapted and used to make ordinal comparisons of two very general measures of tax progressivity- so called “residual” and “liability” progression. Newly developed statistical inference procedures allow us to take the sampling variability inherent in the LIS data into account.

Income Distribution, Tax Structure, and the Measurement of Tax Progressivity

A new discrete formulation of the most commonly used tax progressivity indexes is suggested. This approach allows one to rigorously prove that in some cases the Dalton/Musgrave-Thin and the Kakwani/Suits indexes may rank tax systems differ ently. Moreover, it enables one, when comparing tax progressivity in two countries (or over time) to precisely determine which part of the gap between the indexes is due to differences in pretax incomes, in (standardized) tax rates, and eventually also in the average tax burden. An illustration based on U.S. and Canadian data for the year 1985 confirms the empirical relevance of this formulation of the tax progressivity indexes.

A New Global Measure of Tax Progressivity

The study proposes a new global measure of tax progressivity in terms of inequality indices of pre-tax income and tax defined on the basis of concept of equally distributed equivalent level of income. It is found invariant to tax scale. While the existing measures in this class are found more suitable as indicators of redistributive impact of the tax, the new measure seems more suitable as measure of tax prograssivity or graduation in the tax schedule. The new measure along with the average tax rate is found to help in understanding changes in redistributive impact of the tax. The study reveals the comparison of tax progressivity or redistribution impact over time or, across different tax schedules has to be associated with the measure of progressivity or the welfare function associated with the relevant inequality indices.

A Comparative Analysis of Tax Progressivity in the United States: a Reexamination

This article reexamines the measures of tax progressivity in the fifty states derived Abstract by Greene and Balkan (1987) and finds them to be substantially in error. Recalcu lated progressivity indexes provided in this article exhibit far less deviation than the indexes published by Greene and Balkan.

INTERSECTING TAX CONCENTRATION CURVES AND THE MEASUREMENT OF TAX PROGRESSIVITY: A REJOINDER

Previous article No AccessNOTES AND COMMENTSINTERSECTING TAX CONCENTRATION CURVES AND THE MEASUREMENT OF TAX PROGRESSIVITY: A REJOINDERPETER J. LAMBERT and WILHELM PFÄHLERPETER J. LAMBERT Search for more articles by this author and WILHELM PFÄHLER Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by National Tax Journal Volume 40, Number 4December 1987 Published for: The National Tax Association Article DOIhttps://doi.org/10.1086/NTJ41788703 Views: 3Total views on this site © 1987 National Tax Association. All rights reserved.PDF download Crossref reports no articles citing this article.

On the Measurement of Tax Progressivity: Relative Share Adjustment

Numerous methods for measuring tax progressivity have been proposed but none has gained enthusiastic acceptance. A new measure, relative share adjustment, is introduced that is useful both because of its simplicity and because of the amount of information it provides about the impact of the tax. Relative share adjustment measures the change in relative income shares caused directly by the imposition of a tax.

On the Measurement of Tax Progressivity: An Implication of the Atkinson Theorem

On the Measurement of Tax Progressivity: An Implication of the Atkinson Theorem

Lorenz Domination and Global Tax Progressivity: A Reply

The concept of tax progressivity at a point (local progressivity) is well defined and accepted, but the concept of overall progressivity of a tax schedule (global progressivity) is not as precise and clearly defined, even though it is an important concept and is widely used in evaluating the redistributive impact of tax policies. Public finance economists have been comparing tax schedules and making statements on one as 'more progressive' than another without being very precise about the basis of comparison. In my earlier paper in the May 1985 issue of this JOURNAL (Liu, 1985), I attempted to unify the two concepts of local and global progressivity. Two requirements are imposed when a tax schedule is characterized as globally progressive, one of which is structural and the other redistributive and hence normative in nature. Drawing on the earlier work of Jakobsson (1976), Musgrave-Thin's measure was shown to satisfy both requirements. Two recently proposed measures by Suits (1977) and Kakwani (1976) were shown to be unappealing from both a positive and a normative viewpoint. In their comment on my paper Formby, Smith, and Sykes pointed out an error in a proposition by Jakobsson, thereby showing that the link between the pointwise concept of residual progression and the global concept of Lorenz domination is weaker than indicated by Jakobsson and me. This reduces the appeal of Musgrave-Thin's global measure as structurally consistent with pointwise progressivity everywhere in the tax schedule. The implication is that if we insist on this structural consistency, the basis for comparison of tax schedules will be too restrictive, since comparison will require one post-tax income distribution to Lorenz dominate another for all (instead of for any) pre-tax income distributions. Hence, despite my earlier effort, the device of a global measure of tax progressivity that is consistent with pointwise

Measurement of tax progressivity: A further application

Measurement of tax progressivity: A further application

State Income Tax Progressivity

This article compares the degree of personal income tax progressivity in selected states and investigates the determinants of changes in progressivity through time. D. Suits's and N. C. Kakwani's recently proposed summary measures of tax progressivity are estimated and compared for twelve states with comparable income tax systems. Time series estimates are made for a single state, North Carolina. The analysis reveals that there are systematic differences in progressivity among the states and that inflation and real income growth are important determinants of declining state income tax progressivity.

Measurement of Tax Progressivity: Application

The S index of tax progressivity is used to classify a number of tax/financing alternatives and is applied to the issue of transit financing. Potential household-based funding sources can be compared using data from the 1972-1973 Consumer Expenditure Survey. Subject to certain qualifications, it was found that most funding sources were regressive, but with significant variation. The most regressive alternatives were household tax, cigarette tax, and transit fares; the least regressive were parking, income tax, and stock transfer taxes. The results can be used to compare the progressivity of one source vis-à-vis another or to choose a source to minimize negative distributional impacts.

Measures of Tax Progressivity

Measures of Tax Progressivity

A Comparison of Two New Measures of Tax Progressivity

Recently N. C. Kakwani (I977) and Daniel Suits (I977) independently and simultaneously developed new measures of the degree of tax progression. Both measures are related to the Gini ratio of income inequality and are distinct from conventional elasticity measures of progressivity in that each yields a summary statistic, while standard elasticity measures of progressivity vary as the tax base changes. In this paper we briefly describe the measures, identify their important characteristics, and establish the analytical relation between them. Empirical calculations of the progressivity of the U.S. income tax system for the period I 962-76 reveal that the two measures display different magnitudes of change in progressivity. More importantly, in three out of fourteen years the measures moved in opposite directions.

Measurement of Tax Progressivity: A Comment

Measurement of Tax Progressivity: A Comment

Kakwani's Measure of Tax Progressivity: A Comment

Kakwani's Measure of Tax Progressivity: A Comment