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Flat rate taxes and relative poverty measurement

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Abstract

We provide a systematic analysis of the impact of revenue-neutral changes to the parameters of a flat rate tax system on the level of relative poverty (where the poverty line is some fraction of either the mean or the median post-tax income level). We also perform a similar analysis for a negative income tax system. We find that the choice of poverty line type has important consequences in respect of how changes to the tax parameters affect the level of relative poverty. Our results are illustrated with a numerical simulation, in which we allow the pre-tax income distribution to be either given exogenously or determined endogenously.

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Authors and Affiliations

  1. Department of Economics, Ryerson University, Toronto, ON, M5B 2K3, Canada

    Brennan Scott Thompson

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  1. Brennan Scott Thompson
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Correspondence to Brennan Scott Thompson.

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Thompson, B.S. Flat rate taxes and relative poverty measurement. Soc Choice Welf 38, 543–551 (2012). https://doi.org/10.1007/s00355-011-0537-2

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  • DOI: https://doi.org/10.1007/s00355-011-0537-2

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