Income distribution, tax structure, and the measurement of tax progressivity

A new discrete formulation of the most commonly used tax progressivity indexes is suggested. This approach allows one to rigorously prove that in some cases the Dalton/Musgrave-Thin and the Kakwani/Suits indexes may rank tax systems differ ently. Moreover, it enables one, when comparing tax progressivity in two countries (or over time) to precisely determine which part of the gap between the indexes is due to differences in pretax incomes, in (standardized) tax rates, and eventually also in the average tax burden. An illustration based on U.S. and Canadian data for the year 1985 confirms the empirical relevance of this formulation of the tax progressivity indexes.