Is an inequality-neutral flat tax reform really neutral?

• Juan Prieto Rodríguez ^{[1] [4]} ; Juan Gabriel Rodríguez Hernández ^{[2] [4]} ; Rafael Salas del Mármol ^{[3] [4]}
  1. [1] Universidad de Oviedo

     Universidad de Oviedo

     Oviedo, España

     
  2. [2] Universidad Rey Juan Carlos

     Universidad Rey Juan Carlos

     Madrid, España

     
  3. [3] Universidad Complutense de Madrid

     Universidad Complutense de Madrid

     Madrid, España

     
  4. [4] Instituto de Estudios Fiscales

     Instituto de Estudios Fiscales

     Madrid, España

     

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• Localización: Papeles de trabajo del Instituto de Estudios Fiscales. Serie economía, ISSN 1578-0252, Nº 29, 2004, págs. 7-26
• Idioma: inglés
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• Resumen

  • Let us assume a revenue- and inequality-neutral fiat tax reform shifting from a graduated-rate tax. Is this reform really neutral in terms of the income distribution? Traditionally, there has been a bias toward the inequality analysis, forgetting other relevant aspects of the income distribution. This kind of reforms implies a set of composite transfers, both progressive and regressive, even though inequality remains unchanged. This paper shows that polarization is a useful tool for characterizing this set of transfers caused by inequality-neutral tax reforms. A simulation exercise illustrates how polarization can be used to discriminate between two inequality-neutral tax alternatives.