MEASUREMENT OF RELATIVE TAX PROGRESSIVITY

• Published in: National tax journal 1979-03, Vol.32 (1), p.93-95
• Main Author: GUTHRIE, ROBERT S.
• Format: Article
• Language: English
• Subjects: Corporate income tax; Corporate income taxes; Corporate taxes; Direct taxes; Excise taxes; Income taxes; Indexation; Measurement; NOTES AND COMMENTS; Payroll taxes; Personal income; Personal income taxes; Progressive taxation; Progressive taxes; Property taxes; Regressive; Regressive taxation; Sales taxes; State taxes; Tax rates; Tax revenues; Taxation; Taxes; Total taxes
• ISSN: 0028-0283; 1944-7477
• DOI: 10.1086/NTJ41863203

Daniel B. Suits proposed an applies a very useful statistic to measure the progressivity of a tax, showing that the index for a tax system of two or more taxes is the weighted average of the indices for the individual taxes with the average tax rates as weights. This index can be expanded to combine two distinct concepts: 1. the progressivity of a tax, and 2. the importance of the tax in generating revenues. To judge the true progressivity of a tax, it must be known which income groups pay the tax and how much tax is paid relative to the total tax burden. Rankings of taxes for 1966 from most progressive to most regressive are entirely different depending on which index is used. The individual income tax is the most progressive of all taxes when its high average tax rate is taken into account. As inflation increases, the progressivity of the individual income tax should become even more important relative to taxes which are collected on a fixed percentage basis.