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An operational concept of the ability to pay principle (With an application for The Netherlands, 1973)

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Summary

In this article the authors demonstrate that it is possible to derive a rate schedule of the personal income tax based on the ability to pay principle. The derivation uses three basics: the theory of the lognormal welfare function of income, the theory of equal (proportional) utility sacrifice and results from empirical research, based on the former theory. As an illustrative application the authors present an ‘optimal’ distribution of the personal income tax in the Netherlands in 1973, which is then confronted with the actual distribution of the personal income tax in 1973.

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References

  1. Centraal Bureau voor de Statistiek (CBS),Inkomstenverdeling 1973 en vermogensverdeling 1974, deel I en II, The Hague, 1978.

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  4. Kapteyn, A. and F.G. van Herwaarden, ‘Interdependent Welfare Functions and Optimal Income Distribution,’Journal of Public Economics, XIV (1980), pp. 375–397.

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  9. Praag, B.M.S. van, ‘The Individual Welfare Function of Income and its Offspring,’ in:Relevance and Precision, Essays in Honour of Pieter de Wolff, J.S. Cramer, A. Heertje and P.E. Venekamp (eds.), Amsterdam, 1976, pp. 263–293.

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van Herwaarden, F.G., de Kam, C.A. An operational concept of the ability to pay principle (With an application for The Netherlands, 1973). De Economist 131, 55–64 (1983). https://doi.org/10.1007/BF01676417

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Keywords

  • Empirical Research
  • International Economic
  • Public Finance
  • Actual Distribution
  • Personal Income