On Aggregate Measures of the Net Redistributive Impact of Taxation and Government Expenditure

Abstract

This article develops aggregate measures of the impact upon the distribution of prefisc income of the component parts of the fiscal system, and of the system as a whole. The measures of net redistributive effect, which are based on different types of concentration curves, can be decomposed to explain the separate contributions of taxes, transfers, and government-supplied good income, and can also reveal interactions between these components. This is illustrated using U.S. data. The instrumental roles of tax and expenditure progressivities in determining the net redistributive impact of the fiscal system are specified. It is also demonstrated that a recent theme of the literature, that concerned with measuring net fiscal-incidence progressivity, is inherently problematic and unlikely to reveal useful summary information about the impact of the fiscal system.