On the equitability of progressive taxation

Tapan Mitra, Efe A. Ok

    Research output: Contribution to journalArticle

    Abstract

    We propose the principle of equal sacrifice to determine the class of "vertically inequitable" progressive taxes. A necessary condition for an income tax function to be equal sacrifice is formulated, and hence, a subclass of progressive taxes which cannot inflict the same sacrifice upon all individuals relative toanystrictly increasing and concave utility function is determined. Conversely, it is shown in a general framework that any convex (thus progressive) tax function satisfies the principle of equal sacrifice. Our findings point to the fact that equal sacrifice under progressive income taxation depends heavily upon the degree of marginal rate (as opposed to average rate) progressivity.Journal of Economic LiteratureClassification Numbers: D63, H20.

    Original languageEnglish (US)
    Pages (from-to)316-334
    Number of pages19
    JournalJournal of Economic Theory
    Volume73
    Issue number2
    DOIs
    StatePublished - Apr 1997

    ASJC Scopus subject areas

    • Economics and Econometrics

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