Original scientific paper
https://doi.org/10.1080/1331677X.2023.2185793
Individualism and tax progressivity
Insook Lee
Abstract
This article proposes a novel theoretical model that factors in
individualism culture for explaining tax progressivity. It shows
that an increase in the level of individualism reduces optimal tax
progressivity, regardless of whether a social planner or voters
choose income tax schedule. Moreover, an increase in the pre-tax
income inequality raises tax progressivity optimal for the social
planner or voters, for any given level of individualism. These findings
from introducing individualism culture for tax progressivity
are quite original. This article makes an important contribution of
providing an explanation for the puzzling fact that taxes of some
countries with low inequality of pre-tax income are more progressive
than those of other with high inequality. This article implies
that a country with low pre-tax income inequality can have highly
progressive tax if the country’s culture features fairly low level of
individualism. Empirical analysis with panel data of 87 countries
finds evidence supportive of these theoretical findings.
Keywords
tax progressivity; pre-tax income inequality; individualism culture
Hrčak ID:
314053
URI
Publication date:
15.5.2023.
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