INCOME-DISTRIBUTION, TAX STRUCTURE, AND THE MEASUREMENT OF TAX PROGRESSIVITY

A new discrete formulation of the most commonly used tax progressivity indexes is suggested. This approach allows one to rigorously prove th at in some cases the Dalton/Musgrave-Thin and the Kakwani/Suits indexe s may rank tax systems differently. Moreover it enables one, when comp aring tax progressivity in two countries (or over time) to precisely d etermine which part of the gap between the indexes is due to differenc es in pretax incomes, in (standardized) tax rates, and eventually also in the average tax burden. An illustration based on U.S. and Canadian data for the year 1985 confirms the empirical relevance of this formu lation of the tax progressivity indexes.