Not Available for Download

Winner-Take-All Markets: Easing the Case for Progressive Taxation

Florida Tax Review, 1998

Posted: 20 Aug 1998 Last revised: 21 Sep 2015

Martin J. McMahon, Jr.

University of Florida - Levin College of Law

Alice G. Abreu

Temple University - James E. Beasley School of Law

Abstract

In this article Professors McMahon and Abreu examine data on changes in the distribution of income and show that those changes increasingly reflect a winner-take-all pattern in which economic rewards are increasingly skewed toward those at the top 1% of the income distribution. These changes in the distribution of income invite a re-examination of the arguments for progressive taxation, not because they strengthen the case for redistribution, but because they reflect a market in which progressive taxation is more efficient than proportional taxation. By analyzing the data on the distribution of income and constructing a model that reflects that distribution and makes conservative assumptions about the diminishing marginal utility of money, the article shows that the classic equity/efficiency trade-off is the product of an incrementalist distribution of income. The more the distribution of income reflects a winner take-all society, the more efficient progressive taxation becomes. Thus, we no longer have to choose between equity and efficiency because in a society with a winner take-all distribution of income, progressive taxation can give us both.

This project addresses the design of the rate structure only, taking as its starting point a base like the one employed by the current income tax system. Work currently in progress will consider the implications of the shifts in the distribution of income for the definition of the tax base and, specifically, for the taxation of income from capital.

Notes: This is a description of the article and not the actual abstract.

JEL Classification: H21, H24, K34

Suggested Citation

McMahon, Jr., Martin J. and Abreu, Alice G., Winner-Take-All Markets: Easing the Case for Progressive Taxation. Florida Tax Review, 1998. Available at SSRN: https://ssrn.com/abstract=103308

Martin James McMahon, Jr.

University of Florida - Levin College of Law ( email )

P.O. Box 117625
Gainesville, FL 32611-7625
United States
352-273-0931 (Phone)
352-392-7647 (Fax)

Alice G. Abreu (Contact Author)

Temple University - James E. Beasley School of Law ( email )

1719 N. Broad Street
Philadelphia, PA 19122
United States
215-204-7857 (Phone)
215-204-1185 (Fax)

Paper statistics

Abstract Views
1,621