Ernesto Longobardi

International Trends in Personal Income Tax: Some Aspects of Vertical and Horizontal Equity

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Moving from the observation of the two most important innovations in personal income tax experiences at the international level, the introduction of flat taxes or the flattening of existing taxes, and the introduction of dual income taxes or a movement towards duality, the paper considers the equity implications of such changes. It first compares a graduate rate tax with a flat one in terms of both vertical and horizontal equity. After a review of the existing literature, a simulation is presented on the effects of replacing the Italian personal income tax (IRPEF) with a flat tax with the same revenue. It is shown that a flat tax with a 33% rate would produce a redistributive impact very close to that of IRPEF, while being horizontally equitable in an equivalence scale framework. It is shown that the result of a better performance of a flat tax than a graduate rate tax in a horizontal equity perspective and within the class of constant relative scales is not sensitive to the choice of scale. In many respects the dual income tax can also represent an improvement on equity grounds if compared with the traditional personal income tax.


  • personal income tax
  • flat tax
  • horizontal equity
  • equivalence scales


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