Does Growing Inequality Reduce Tax Progressivity? Should It? / Joel Slemrod, Jon Bakija.

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Slemrod, Joel

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w7576.Publication details: Cambridge, Mass. National Bureau of Economic Research 2000.Description: 1 online resource: illustrations (black and white)Subject(s):

H2 - Taxation, Subsidies, and Revenue

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Abstract: This paper explores the links between two phenomena of the past two decades: striking increase in the inequality of pre-tax incomes, and the failure of tax-and-transfer progressivity to increase. We emphasize the causal links going from inequality to progressivity, noting that optimal taxation theory predicts that growing inequality should increase progressivity. We discuss public choice alternatives to the optimal progressivity framework. The paper also addresses the opposite causal direction: that it is changes in taxation that have caused an apparent increase in inequality. Finally, we discuss the non-event-study' offered by the large changes in the distribution of income--with no major tax changes-- since 1995, and discuss its implications for the link between progressivity and inequality.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w7576 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

March 2000.

This paper explores the links between two phenomena of the past two decades: striking increase in the inequality of pre-tax incomes, and the failure of tax-and-transfer progressivity to increase. We emphasize the causal links going from inequality to progressivity, noting that optimal taxation theory predicts that growing inequality should increase progressivity. We discuss public choice alternatives to the optimal progressivity framework. The paper also addresses the opposite causal direction: that it is changes in taxation that have caused an apparent increase in inequality. Finally, we discuss the non-event-study' offered by the large changes in the distribution of income--with no major tax changes-- since 1995, and discuss its implications for the link between progressivity and inequality.