An application of the tax ratio of intension

Abstract

Public policy makers occasionally modify existing personal income tax legislation with the explicit intent of easing the tax burden through more generous personal maintenance allowances, leaving the tax schedule (in terms of marginal rates of tax per income bracket) unchanged. The modification of income tax structure l affects directly both public revenue and the disposable income of the tax-paying units. A tax structure could be described by means of a series of ratios giving the effective rates (i.e. tax/own income) for different tax-unit statuses, whereby tax-status is defined in terms of the maintenance burdens. Such a series would become unhandy when comparative exercises are undertaken; therefore, it is helpful for certain purposes, if a summary statistic, expressing an overall view about a tax structure, were available.