Progressivity

This article, based on a longer research paper, is interesting throughout. Working with an enormous database of distributional national accounts, the authors quantify the redistributive impacts of tax and transfer systems across countries. I repeat their key findings here: 

We establish five main findings:

1. Tax-and-transfer systems always reduce inequality, but with large variations.

2.About 90% of these variations are driven by transfers, while only 10% come from taxes.

3. Redistribution rises with development, but this is entirely due to transfers; tax progressivity is uncorrelated with per capita income.

4. Redistribution has increased in most world regions, except in Africa and Eastern Europe, where it has stagnated.

5. About 80% of variations in post-tax inequality are driven by differences in pre-tax inequality (predistribution), while 20% are driven by the direct effect of taxes and transfers (redistribution).

Some caveats are in order, some of which spring from somewhat arbitrary or at least contestable choices made in the classifications. First, they count "social insurance" payments such as social security as part of pre-tax incomes, and hence "predistribution." Second, conditional cash grants are counted as transfers; presumably this implies that "negative income tax" programs such as the earned income tax credit (EITC) are counted as part of the transfer system, not the tax system. And inevitably they have to make numerous simplifying assumptions about the incidence of taxes and transfers (who really pays?), etc.

Perhaps the biggest takeaway is the last: cross-country differences in the inequality of pre-tax income accounts for the lion's share of cross-country differences in post-tax inequality. Of course, predistribution includes lots of determinants, many of which are driven by government policies, such as educational systems. It would not seem to be a category error to think of educational equity as part of redistribution, rather than predistribution.