Kristoffer Berg, UiO. "Revealing equity principles from tax policy"
Department webinar. Kristoffer Berg is a PhD candidate at the University of Oslo. He will present the paper: "Revealing equity principles from tax policy”.
Which equity principles can support current tax policy? This paper shows how vertical and horizontal equity rationalize tax policy choices by governments. While vertical equity provides the standard inequality aversion rationale for redistributive taxation, most tax models ignore horizontal equity. Horizontal equity introduces a restriction that individuals should be treated independently of certain characteristics, which is necessary to explain current tax policy. The first contribution is to map the government’s overall marginal priority into the concerns for vertical and horizontal equity. Then I derive a sufficient statistic for the effect of horizontal equity on a measure of inequality aversion. The second contribution is to apply the model to measure the implication of horizontal equity across gender in the current Norwegian tax system. In the application, inequality aversion is overestimated when horizontal equity is ignored.