Consistent income tax structures when households are heterogeneous

The paper examines the redistributive impact of income taxation for heterog eneous populations. An equivalent income function is introduced in order to adjust the incomes of different types of households and the redistributive performance of the tax system is evaluated by comparing the Lorenz curves of the distributions of before and after tax equivalent incomes. Inequality reduction after tax imposes mild consistency conditions which are met by m ost current tax systems. If the inequality reducing effect of taxation is r equired to be independent of the reference household type, then the structu re of the equivalent income function is fully determined by the inequality concept. Classification Numbers: D31, D63, H24. (C) 2000 Academic Press.