MEASUREMENT OF TAX PROGRESSIVITY: AN INTERNATIONAL COMPARISON.

This paper focuses on the problems of measurement of progressivity in taxation and public expenditure. The problem has attracted the attention of several writers. Among the important contributions to this field are those of Dalton (1955), Slitor (1948), Musgrave and Thin (1948) and Bracewell-Milnes (1971). The major weakness of the existing literature is that it does not distinguish between the effects of changes in average tax rates and in progressivity on the distribution of income. One of the aims of this paper is to show how the distributional effect of taxation is influenced by changes in the average tax rate while progressivity is held constant and vice versa. Further the method enables one to study the contribution of individual taxes and expenditure items to the overall progressivity of the fiscal system of taxation and public expenditure. Finally, the methods developed are applied to the empirical investigation of fiscal operations in four developed countries -- Australia, Canada, the United Kingdom and the United States. In this paper a new measure of tax progressivity has been introduced. This measure helps to distinguish between different effects of taxation on income distribution. In particular, it has helped to show clearly that the reduction in income distribution resulting from taxation depends not only on the degree of tax progressivity, as is commonly believed, but also on average tax rate. We have also analysed the effects of various taxes and items of public expenditure at different levels of Government. This empirical analysis has been done for four developed countries, namely Australia, Canada, the United Kingdom and the U.S.A. It would be interesting for future research to extend the empirical analysis to other developed and developing countries. [ABSTRACT FROM AUTHOR]