Revealing inequality aversion from tax policy and the role of non‐discrimination

Governments have increasing access to individual information, but they exploit little of it when setting taxes. This paper shows how to reveal inequality aversion from observed tax policy choices of such governments. First, I map governments' priorities into concerns for vertical and horizontal equity. While vertical equity underlies inequality aversion, horizontal equity introduces a restriction against tax discrimination. This restriction affects the measurement of inequality aversion. Second, I apply the model to a hypothetical gender tax using Norwegian tax return data. The main result is that inequality aversion is overestimated when horizontal equity is ignored

Economics · Inequality · Inequity aversion · Positive economics · Public economics · Tax policy · Tax reform · Fiscal Policy and Economic Growth · Gender, Labor, and Family Dynamics · Mathematics · Taxation and Compliance Studies

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