Does Growing Inequality Reduce Tax Progressivity? Should It?

Joel Slemrod and Jon Bakija

No 7576, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: H2 (search for similar items in EconPapers)
Date: 2000-03
New Economics Papers: this item is included in nep-lab, nep-pbe and nep-pub
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published as Hassett, K. and R. G. Hubbard (eds.) Inequality and Tax Policy. Washington, DC: The AEI Press for the American Enterprise Institute, 2001.

Downloads: (external link)
http://www.nber.org/papers/w7576.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:7576

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w7576

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().