Discussion Papers no. 663

The inequality effects of a dual income tax system

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The overall inequality effects of a dual income tax (DIT) system, combining progressive taxation of labor income with proportional taxation of income from capital, are investigated. Simple examples show that correlations between distributions of wage and capital income, the degree of tax rate differentiation in the DIT, and reranking of tax-payers can be expected to complicate the analysis. We trace out what can be said definitively, obtaining sufficient conditions for unambiguous inequality reduction and identifying the nature of the implicit redistribution between labor and capital income which is involved, with the help of Norwegian income tax data.

Om publikasjonen

Tittel

The inequality effects of a dual income tax system

Ansvarlige

Peter J. Lambert, Thor Olav Thoresen

Serie og -nummer

Discussion Papers no. 663

Utgiver

Statistics Norway

Emne

Discussion Papers

ISSN

1892-753X

Antall sider

15

Målform

Engelsk

Om Discussion Papers

Discussion papers comprise research papers intended for international journals and books. A preprint of a Discussion Paper may be longer and more elaborate than a standard journal article as it may include intermediate calculations, background material etc.

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