Search results

This paper has two goals. First it determines the respective impacts of variations in the tax rates and in the distribution of pre-tax incomes on changes in tax progressivity in the United Kingdom during the period 1960–2001. Second it checks whether macroeconomic variables or the political cycle influenced the degree of tax progressivity. The results of the empirical analysis show that the significant decrease in tax progressivity observed between 1960 and 1982 was essentially the result of a variation in the distribution of pre-tax incomes. During the later period (1982–2001) the data indicate that there was no significant change in overall progressivity and in the components of its change. The second part of this study indicates that in the long run both inflation and unemployment negatively affect tax progressivity. The impact of the political cycle on tax progressivity is not clear and the results depend on the tax progressivity index that is used. It is interesting to note that in the cases where a political effect is found it indicates that under the Labour party, tax progressivity increased, for a given level of inflation and unemployment. The econometric analysis also shows that in the short run, only unemployment has a significant effect on tax progressivity.

Scholars suggest that failure to include implicit taxes in analyses of vertical equity understates the progressivity of the tax system. This paper develops an analytic expression for imputing the implicit tax associated with tax-exempt bonds using the tax-exempt interest income reported on individual income tax returns. To measure progressivity, Kakwani indices are calculated using three definitions of income and three measures of tax liability. In addition, the indices are computed by adding implicit income to the income measure. Examination of the Kakwani indices leads to the conclusion that the tax system is progressive for all measures of tax liability. Total tax (explicit plus implicit), measured against explicit plus implicit income, is more progressive than explicit tax measured against explicit income. Including the implicit tax associated with tax-exempt interest in the measurement of tax progressivity increases the level of progressivity of the tax system slightly.

This paper investigates the impact of state governments’ “Tax and Expenditure Limits” (TELs) on their tax progressivity and redistributive spending. A two stage least squares (2SLS) regression model of data covering 1985-2007, was employed to allow for simultaneity in the relationships between intergovernmental transfer, tax progressivity, expenditure progressivity, and labor mobility. This model tested whether high- or low income residents had paid for and benefited from these fiscal institutions. As a result we find that TELs significantly decrease tax progressivity and increase poverty rate. These two policy effects should be explicitly accounted for in the design or revision of TELs.

This paper produces a comprehensive assessment of income redistribution to the working-age population, covering OECD countries over the last two decades. Redistribution is quantified as the relative reduction in market income inequality achieved by personal income taxes (PIT), employees’ social security contributions, and cash transfers, based on household-level micro-data. A detailed decomposition analysis uncovers the respective roles of size, tax progressivity, and transfer targeting for overall redistribution, the respective role of various categories of transfers for transfer redistribution; as well as redistribution for various income groups. The paper shows a widespread decline in redistribution across the OECD, both on average and in the majority of countries for which data going back to the mid-1990s are available. This was primarily associated with a decline in cash transfer redistribution while PIT played a less important and more heterogeneous role across countries. In turn, the decline in the redistributive effect of cash transfers reflected a decline in their size and in particular by less redistributive insurance transfers. In some countries, this was mitigated by more redistributive assistance transfers but the resulting increase in the targeting of total transfers was not sufficient to prevent transfer redistribution from declining.

New measures of the degree of overall income tax progression in the United States are provided for the period 1969 to 1995. Indices of progression from the distributional and tax scale invariant classes of measures are considered. The sensitivity of measures of progression to the income concept used and to equivalence scale adjustments is explored. Recently developed statistical inference procedures are applied to reveal new insights into changes in progressivity across time. Using a microdata based measure of comprehensive income and applying statistical tests are shown to be of crucial importance in reaching conclusions about changes in income tax progression.

The paper proposes an alternative way of defining tax progressivity, one in which it becomes a function of marginal, not average tax rates. Changes in Tax Progressivity are then related to modifications in the distribution of pre-tax incomes or to variations in marginal rates. Using Israel’s Wage and Insurance Data File for the year 1993, the empirical analysis checks the impact of the 1995 Law for the Reduction of Poverty and Income Disparities on the progressivity of the National Insurance Tax System. Simulations are also conducted to study the effect of alternative policies.

This paper uses a lifetime income simulation model to examine the effects on inequality and progressivity of extending the time period over which income is measured. The income tax schedule typically displays increasing marginal rates, and there is a substantial amount of relative income mobility, along with a systematic variation in average incomes over the life cycle of the cohort. Simulations show that progressivity and inequality measures can often move in opposite directions, both over time for annual accounting periods, and as the length of period is gradually increased. The relationship between summary measures is complicated by the role of the aggregate tax ratio, in addition to the re‐ranking that can occur in the larger period framework. Some tax structures are found to increase in progressivity, while others show less progressivity, as the time period increases. Re‐ranking is found to increase as the accounting period increases: it is higher and increases more rapidly as the accounting period is increased for tax structures displaying more steeply rising rate structures.

This paper aims to evaluate the progressivity of health-care financing in Egypt by assessing all five financing sources individually and then combining them to analyze the equity of the whole financing system.

Lorenz dominance analysis and Kakwani progressivity index were applied on data from 2010/2011 Household Income, Expenditure, and Consumption Survey and the National Health Accounts 2011 using Stata to evaluate the progressivity of each source of health-care finance and the financing system overall.

The data show that Egypt’s health-care system, which is largely financed by out-of-pocket (OOP) payments, is slightly regressive, with an overall Kakwani index of −0.079. The overall regressive effect was the result of three regressive sources (OOP payments, an earmarked cigarette tax and direct taxes), one proportional finance source (social health insurance) and two slightly progressive sources (indirect taxes and private health insurance). This shows that the burden of financing health care falls more on the poor. These results signal the need for reform of health-care financing in Egypt to reduce dependence on OOP payments to achieve more equitable financing.

The paper seeks to augment the literature on health-care financing in Egypt by calculating specific progressivity estimates for all five sources of financing the Egyptian health-care system and analyzing the overall equity of this financing system. It will, therefore, provide a benchmark for monitoring the equity of finance in the Egyptian health-care system in future studies and allow one to assess the impact of implemented financing reforms in the future on the level of progressivity of health system financing.

The purpose of this paper is to examine the distributional impact of personal income tax in Canada and China over the most recent decade.

The Urban Household Survey in China and the Canadian Socio‐Economic Information Management System data are employed.

It was found that, in both Canada and China, the personal income taxes are progressive, that is, tax payments and average tax rates are increasing in the income share of high‐income taxpayers.

This paper does not explore the connection between tax progressivity differences and social, political, and cultural differences in the two countries.

This paper is of interest to policy makers, economists, and academics, who seek to design an income tax system which can mitigate income inequity efficiently. Given that income taxes have changed in China in recent years, future studies should be conducted to compare the distributional impacts of the new tax system against those of the old tax system.

This is the first study of distributional impact of income tax in China. This is also the first study to compare tax distribution between China and a developed country.

Dissatisfaction with the current federal tax system is fostering serious interest in several tax reform plans such as a value-added tax (VAT), a flat tax, and a national retail sales tax. Recently, one of the former Republican presidential candidates, Herman Cain, initiated a 999 tax plan. As illustrated on Cain’s official website, the 999 plan intends to replace current federal taxes with a 9% business flat tax, a 9% individual flat tax, and a 9% national sales tax. We examine the distributional effects of the 999 tax plan, as well as the current system it intends to replace, under both annual income and lifetime income approaches. Global measures of progressivity and bootstrap-t confidence intervals suggest that the current federal tax system is progressive while Cain’s 999 tax plan is regressive under the annual income approach. Under the lifetime income approach, both the current federal tax system and Cain’s 999 tax plan show progressivity. However, the current federal tax system is more progressive. The findings in this study suggest that Cain’s 999 tax plan should be considered more seriously and further analysis of the 999 tax plan is warranted.