Measures of reranking of taxpayers in income distribution caused by the tax system
Measures of reranking of taxpayers in income distribution caused by the tax system

Summary/Abstract: Quest for justice in the taxation seems to be the timeless problem. Complexity of issues related to the public finance – combined with the compulsory character of public duties – raises the natural question concerning fair distribution of burdens. One of the basic, undisputed rules within the theory of taxation is the principle of horizontal equity. This principle, postulating equal treatment of equals, embodies both universality and uniformity of taxation. In this sense, horizontal tax equity could be treated as a basic property of the tax system, however, there exists no widely accepted way of measuring this phenomenon. In this context measures of horizontal tax equity applied in literature are based on the decomposition of redistributive effect and the Atkinson-Plotnick-Kakwani index as an index of reranking. The aim of this paper is focus on the problem measuring of reranking among taxpayers. We compare the universally applied Atkinson-Plotnick-Kakwani index with the new suggested measures based on the changes in the ranking of taxpayers in the income distribution. The analysis is performed for the data on income and taxes, originating from one of the Lower- Silesian tax offices.

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