DECOMPOSING THE GINI COEFFICIENT TO REVEAL THE VERTICAL, HORIZONTAL, AND RERANKING EFFECTS OF INCOME TAXATION

Taxes may treat equals unequally, they may treat unequals unequally, and they may cause the ranking of people from poor to rich to be different posttax than it was pretax. This paper offers geometric and mathematical techniques for measuring and computing the above three effects. They are referred t...

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Veröffentlicht in:National tax journal 1994-06, Vol.47 (2), p.273-294
Hauptverfasser: ARONSON, J. RICHARD, LAMBERT, PETER J.
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description Taxes may treat equals unequally, they may treat unequals unequally, and they may cause the ranking of people from poor to rich to be different posttax than it was pretax. This paper offers geometric and mathematical techniques for measuring and computing the above three effects. They are referred to as the vertical, horizontal, and reranking effects. Several scholars currently equate the reranking effect with horizontal inequity. We show, however, that the reranking effect is separate and distinct from the traditional concept of horizontal equity. Our measures are derived by comparing the pretax and posttax Gini coefficients and decomposing the total redistributive effect of the tax. We compare our method to others and provide some preliminary empirical estimates for the income taxes used in the United Kingdom and Italy. For the United Kingdom and Italy, vertical effects dominate horizontal and reranking effects. However, we suspect that for the United States income tax the horizontal and reranking effects will have greater relative importance.
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subjects Analysis
Economic aspects
Effects
Equality
Equity
Gini coefficient
Horizontal equity
Income distribution
Income inequality
Income tax
Income taxes
Lorenz curve
Progressive taxation
Proportional taxes
Ratings & rankings
Regressive taxation
Statistical analysis
Studies
Taxation
Taxation systems
Taxes
Wealth
title DECOMPOSING THE GINI COEFFICIENT TO REVEAL THE VERTICAL, HORIZONTAL, AND RERANKING EFFECTS OF INCOME TAXATION
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