ON THE EQUITABILITY OF PROGRESSIVE TAXATION

We propose the principle of equal sacrifice to determine the class of ''vertically inequitable'' progressive taxes. A necessary condition fo r an income tax Function to be equal sacrifice is formulated, and henc e, a subclass of progressive taxes which cannot inflict the same sacri fice upon all individuals relative to any strictly increasing and conc ave utility function is determined. Conversely, it is shown in a gener al framework that any convex (thus progressive) tax function satisfies the principle of equal sacrifice. Our findings point to the fact that equal sacrifice under progressive income taxation depends heavily upo n the degree of marginal rate (as opposed to average rate) progressivi ty. (C) 1997 Academic Press.