Personal Income Tax Progressivity: Trends and Implications

25 Pages Posted: 14 Jan 2019

See all articles by Claudia Gerber

Claudia Gerber

Boston Consulting Group

Alexander Klemm

International Monetary Fund (IMF)

Li Liu

International Monetary Fund (IMF)

Victor Mylonas

International Monetary Fund (IMF)

Date Written: November 2018

Abstract

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.

Keywords: Progressive taxation, Personal income taxes, Tax systems, Income inequality, Economic growth, Progressivity; Growth; Personal Income Tax; Tax Wedge; Inequality, Progressivity, Growth, Personal Income Tax, Tax Wedge, Inequality, Household

JEL Classification: H23, H31

Suggested Citation

Gerber, Claudia and Klemm, Alexander and Liu, Li and Mylonas, Victor, Personal Income Tax Progressivity: Trends and Implications (November 2018). IMF Working Paper No. 18/246. Available at SSRN: https://ssrn.com/abstract=3314577

Claudia Gerber (Contact Author)

Boston Consulting Group ( email )

J.F. Kennedylaan 100
3741 EH Baarn
United States

Alexander Klemm

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Li Liu

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Victor Mylonas

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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