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Should the Rich be Taxed More? The Fiscal Inequality Coefficient

Author

Listed:
  • John Hatgioannides

    (Cass Business School)

  • Marika Karanassou

    (Queen Mary University of London)

  • Hector Sala

    (Departament d'Economia Aplicada (UAB), IZA Fellow, Institute for the Study of Labor (Bonn))

Abstract

This paper holistically addresses the effective (relative) income tax contribution of a given income (or, wealth) group. The widely acclaimed standard in public policy is the absolute benefaction of a given income group in filling up the fiscal coffers. Instead, we focus on the ratio of the average income tax-rate of an income group divided by the percentage of national income (or wealth) appropriated by the same income group. In turn, we develop the Fiscal Inequality Coefficient which compares the effective percentage income tax payments of pairs of income (or wealth) groups. Using data for the US, we concentrate on pairs such as the Bottom 90% versus Top 10%, Bottom 99% versus Top 1% and Bottom 99.9% versus Top 0.1%. We conclude that policy makers with a strong social conscience should re-evaluate the progressivity of the income tax system and make the richest echelons of the income and wealth distributions pay a fairer and higher tax.

Suggested Citation

  • John Hatgioannides & Marika Karanassou & Hector Sala, 2017. "Should the Rich be Taxed More? The Fiscal Inequality Coefficient," Working Papers 832, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:832
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    References listed on IDEAS

    as
    1. Thomas Piketty & Emmanuel Saez & Gabriel Zucman, 2018. "Distributional National Accounts: Methods and Estimates for the United States," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(2), pages 553-609.
    2. Marika Karanassou & Hector Sala, 2012. "Distributional Consequences of Capital Accumulation, Globalisation and Financialisation in the US," Working Papers 695, Queen Mary University of London, School of Economics and Finance.
    3. Jon D. Wisman & James F. Smith, 2011. "Legitimating Inequality: Fooling Most of the People All of the Time," American Journal of Economics and Sociology, Wiley Blackwell, vol. 70(4), pages 974-1013, October.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Fiscal policy; progressive income taxation; inequality; effective income tax rate; fiscal inequality coefficient;
    All these keywords.

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy

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