Progression and the Design of tax Functions
Many taxpayers are very much concerned about hidden increases in the degree of progression going along with increases in pre-tax income. The situation is the following: If the income tax function is progressive in the sense that the average tax rate is increasing in income before tax, then this implies a decrease in the ratio of net income to income before tax. In an economy where all incomes increase over some periods of time, not necessarily with the same rate, the share that the government collects of the income before tax earned by the people increases, unless the tax function is changed.
Unable to display preview. Download preview PDF.