On progressive tax systems with heterogeneous preferences

Oriol Carbonell-Nicolau

Journal of Mathematical Economics, 2025, vol. 117, issue C

Abstract: The properties of progressive income tax systems vis-à-vis standard measures of inequality and polarization have been studied elsewhere, both for economies with exogenous and endogenous income. In the case of endogenous income, preferences are assumed to be identical across consumers. This paper relaxes the preference homogeneity assumption. Using the relative Lorenz inequality order and the relative Foster–Wolfson bipolarization order, we show that income tax systems reduce both inequality and polarization — no matter what the economy’s initial conditions are — only if they are progressive. Furthermore, we identify specific conditions related to heterogeneous consumer preferences under which progressive tax systems effectively mitigate inequality and polarization.

Keywords: Progressive income taxation; Income inequality; Income bipolarization; Endogenous income (search for similar items in EconPapers)
JEL-codes: D31 D63 D71 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:117:y:2025:i:c:s0304406825000151

DOI: 10.1016/j.jmateco.2025.103098

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