Flat rate taxes and relative poverty measurement: a reconsideration
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Thompson (Soc Choice Welf 38:543–551, 2012) studies the impact of revenue-neutral changes to the parameters of a flat rate tax system and a negative income tax system respectively on the level of relative poverty with different definitions of the poverty line. Under the flat rate tax system, for the case where this line is some fraction of the median post-tax income level, we show in this note that in general one of its main propositions does not hold, and then propose an additional assumption to redress some assertions of that proposition.
The author is very grateful to Salvador Barberà, Lixin Wang, an editor and an anonymous referee for inspiring comments and suggestions, and Timing Yu for excellent research assistance.