Personal Income Tax Progressivity: Trends and Implications

Author/Editor:

Claudia Gerber ; Alexander D Klemm ; Li Liu ; Victor Mylonas

Publication Date:

November 20, 2018

Electronic Access:

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Summary:

This paper discusses how the structure of the tax system affects its progressivity. It suggests a measure of progressive capacity of tax systems, based on the Kakwani index, but independent of pre-tax income distributions. Using this and other progressivity measures, the paper (i) documents a decline in progressivity over the last decades and (ii) examines the relationship between progressivity and economic growth. Regressions do not reveal a significant impact of progressivity on growth, suggesting that efficiency costs of progressivity may be small—at least for degrees of progressivity observed in the sample.