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Is an inequality-neutral flat tax reform really neutral?

Juan Prieto Rodríguez (), Juan Gabriel Rodríguez () and Rafael Salas ()
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Juan Prieto Rodríguez: Universidad de Oviedo e Instituto de Estudios Fiscales,
Juan Gabriel Rodríguez: Universidad Rey Juan Carlos de Madrid e Instituto de Estudios Fiscales,

Authors registered in the RePEc Author Service: Juan Gabriel Rodríguez () and Juan Prieto-Rodriguez ()

No E2004/43, Economic Working Papers at Centro de Estudios Andaluces from Centro de Estudios Andaluces

Abstract: Let us assume a revenue- and inequality-neutral flat tax reform shifting from a graduated-rate tax. Is this reform really distributional neutral? Traditionally, there has been a bias toward the inequality analysis, forgetting other relevant aspects of the income distribution. This kind of reforms implies a set of composite transfers, both progressive and regressive, even though inequality remains unchanged. This paper shows that polarization is a useful tool for characterizing this set of transfers caused by inequality-neutral tax reforms. A simulation exercise illustrates how polarization can be used to discriminate between two inequality-neutral tax alternatives.

Keywords: polarization; inequality; flat tax (search for similar items in EconPapers)
JEL-codes: D39 D63 H30 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2004
New Economics Papers: this item is included in nep-acc and nep-pbe
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