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Progressivity effects of structural income tax reforms

Author

Listed:
  • Michael Keen

    (Institute for Fiscal Studies and International Monetary Fund)

  • Henry Papapanagos

    (Institute for Fiscal Studies)

  • Anthony Shorrocks

    (Institute for Fiscal Studies)

Abstract

The theoretical analysis of tax progressivity has proceeded on the unrealistic assumption that tax liability is never zero, thereby precluding a systematic examination of the progressivity effects of such basic tax reforms as an increase in personal allowances. This paper extends the core results on progressivity to cover zero tax payments, and applies these new results to the analysis of allowances, deductions and credits. Log concavity of the tax schedule a property quite distinct from any notion of progressivity emerges as the critical determinant of whether liability progression rises uniformly as allowances are increased, and it is shown that any variation in averagae tax rates is sufficient to admit the possibility that residual progression is reduced by an increase in either allowances, income-related deductions, or tax credits.

Suggested Citation

  • Michael Keen & Henry Papapanagos & Anthony Shorrocks, 1996. "Progressivity effects of structural income tax reforms," IFS Working Papers W96/17, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:96/17
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    Cited by:

    1. Adam Wagstaff & Eddy van Doorslaer, 2001. "What Makes the Personal Income Tax Progressive? A Comparative Analysis for Fifteen OECD Countries," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 8(3), pages 299-316, May.
    2. Abdelkrim Araar & Luis Huesca, 2014. "Comparison of the Tax System Progressivity Over Time: Theory and Application with Mexican Data," Cahiers de recherche 1419, CIRPEE.
    3. Wagstaff, Adam & van Doorslaer, Eddy & van der Burg, Hattem & Calonge, Samuel & Christiansen, Terkel & Citoni, Guido & Gerdtham, Ulf-G. & Gerfin, Michael & Gross, Lorna & Hakinnen, Unto, 1999. "Redistributive effect, progressivity and differential tax treatment: Personal income taxes in twelve OECD countries," Journal of Public Economics, Elsevier, vol. 72(1), pages 73-98, April.

    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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