The Benefits of Progressive Taxation in Economic Development

Abstract

Progressive income taxation may result in a more equitable income distribution, higher revenues, less financial and economic volatility, and faster growth. The evidence shows a link with higher revenues and a more equitable income distribution but also with larger deficits. There is no link to output volatility and growth. The alternative of a value-added tax does not offer universally better outcomes, either in isolation or in combination with progressive taxes.