Progressive consumption tax, minimum consumption, and inequality

Hoang Khieu () and Tien Van Nguyen

Economics Letters, 2020, vol. 197, issue C

Abstract: In this note, we study the effects of a progressive consumption tax on wealth and consumption inequality in a model economy featuring minimum consumption. We show that increasing the lower and upper bounds of the progressive tax rate reduces wealth and consumption inequality in the long run but is not sufficient. The lower and upper bounds must not exceed the thresholds, which are decreasing functions of minimum consumption. The result is useful for empirical studies of the redistribution of wealth and consumption.

Keywords: Progressive consumption tax; Minimum consumption; Wealth inequality; Consumption inequality (search for similar items in EconPapers)
JEL-codes: C02 D31 E21 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:197:y:2020:i:c:s0165176520304134

DOI: 10.1016/j.econlet.2020.109653

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