The Inherent Conflict Between Progressive Tax Rates and Income Inequality: Lessons from COVID-19 Restrictions

28 Pages Posted: 22 Mar 2021 Last revised: 29 Dec 2021

See all articles by Nathan C. Goldman

Nathan C. Goldman

North Carolina State University - Department of Accounting

Stephen J. Lusch

Texas Christian University - Department of Accounting

Gil Sadka

University of Texas at Dallas

Date Written: December 12, 2021

Abstract

We examine the relation between progressive tax rates, income inequality, and state income tax collections. We provide evidence that states with more progressive tax rate structures have higher tax collections. We then show an enhanced relation for states that enacted more stringent COVID-19 restrictions, which increased income inequality. Our evidence sheds light on the inherent conflict between progressive tax structures and income inequality—income inequality increasing policies result in higher tax collections with a progressive tax system even though the latter reduces after-tax income inequality.

Keywords: COVID-19, Progressive Tax Rates, Income Inequality, State Tax Collections, Health Economics; Political Economy

JEL Classification: D63, H24, H31, H51, H53, H71

Suggested Citation

Goldman, Nathan C. and Lusch, Stephen J. and Sadka, Gil, The Inherent Conflict Between Progressive Tax Rates and Income Inequality: Lessons from COVID-19 Restrictions (December 12, 2021). Available at SSRN: https://ssrn.com/abstract=3808836 or http://dx.doi.org/10.2139/ssrn.3808836

Nathan C. Goldman (Contact Author)

North Carolina State University - Department of Accounting ( email )

Raleigh, NC 27695-8113
United States

Stephen J. Lusch

Texas Christian University - Department of Accounting ( email )

M.J. Neeley School of Business
TCU Box 298530
Fort Worth, TX 76129
United States

Gil Sadka

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

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