An Index of Inequality: With Applications to Horizontal Equity and Social Mobility

An index of Inequality is constructed which decomposes into two components, corresponding to vertical and "horizontal" equity respectively. Horizontal equity Is defined in terms of changes in the ordering of a distribution. The proposed index is a function to two inequality aversion parameters. One empirical application is for comparison of a pre-tax distribution with a post-tax distribution, and an example of this is given for the distribution of incomes in the UK in 1977. There is a trade-off between "horizontal"and vertical equity, and for particular combinations of the inequality aversion parameters the original distribution will be preferred to the final distribution. The paper concludes with an application of the proposed index to a model of optimal taxation.

The Cash Flow Corporate Income Tax

The current debate on tax reform has raised again the question of how the corporate tax system should be altered. The cumulative effect of piece meal changes to the tax system has been to produce major distortions in the pattern of savings and investment and falling revenue in real terms. To overcome these problems, reform, both in the US and UK, has focussed on ways to tax the real economic income of companies. The main problems with this approach are the difficulties of (a) indexing the tax treatment of income from capital in a comprehensive manner and (b) defining economic depreciation. This paper discusses and alternative way to obtain the objective of fiscal neutrality without a significant erosion of the tax base. The implications of such a cash flow corporate income tax for financial and investment decisions are discussed both theoretically and in terms of potential and administrative and practical problems of implementation.

Monetary policy strategies : a central bank panel

Greenspan, Alan ; Monetary policy ; Banks and banking, Central