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Income Taxation and Equity

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  • Peter J. Lambert

    (Department of Economics, University of York)

Abstract

This paper provides an exposition and explanation of the various ways in which value judgements can be instilled into an income tax system, or, if inherent in a pre-existing one, can be drawn out and understood. A putative EUwide income tax, additional to the national income taxes of the Member States, is used as a vehicle for the analysis. When the identification of equals is done using an appropriate ‘equivalent income function’, and the equal treatment command modelled in terms of it, the resultant tax will in general be differentiated between countries. A supplementary command, “equal progression among equals”, can be achieved if equals are defined as those at the same percentile point in the withincountry distributions, and if these distributions differ in logarithms only by location and scale. Differentiated proportional taxes could even be equitable in this scenario, the flat rate being higher in less unequal countries. The value judgements implicit in a given tax system can be exposed in terms of an equivalence scale which is in general “base dependent”.

Suggested Citation

  • Peter J. Lambert, 2004. "Income Taxation and Equity," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 4(2), pages 39-54, July.
    • Handle: RePEc:bic:journl:v:4:y:2004:i:2:p:39-54
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    File URL: https://www.tandfonline.com/doi/epdf/10.1080/1406099X.2004.10840410
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    Cited by:

    1. Paolo Brunori & Flaviana Palmisano & Vito Peragine, 2014. "Income taxation and equity: New dominance criteria and an application to Romania," Working Papers 348, ECINEQ, Society for the Study of Economic Inequality.
    2. Bruno S. Frey & Benno Torgler, 2004. "Taxation and Conditional Taxation," Working Papers 2004/7, Institut d'Economia de Barcelona (IEB).
    3. Ilona Skačkauskienė, 2013. "Peculiarities of Labour Income Taxation in the Baltic States," Entrepreneurial Business and Economics Review, Centre for Strategic and International Entrepreneurship at the Cracow University of Economics., vol. 1(4), pages 57-69.
    4. Bruno S. Frey & Benno Torgler, 2004. "Taxation and Conditional Taxation," Working Papers 2004/7, Institut d'Economia de Barcelona (IEB).
    5. Maria Giovanna Monti & Simone Pellegrino & Achille Vernizzi, 2015. "On Measuring Inequity in Taxation Among Groups of Income Units," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(1), pages 43-58, March.
    6. Luis José Imedio Olmedo & Encarnación Macarena Parrado Gallardo & María Dolores Sarrión Gavilán, 2005. "Horizontal equity, equal progression: an utilitarian approach," Hacienda Pública Española / Review of Public Economics, IEF, vol. 174(3), pages 87-115, September.
    7. Peter J. Lambert, 2007. "Positional equity and equal sacrifice: design principles for an EU-wide income tax?," Working Papers 0706, University of Otago, Department of Economics, revised Apr 2007.

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