A LOCAL DISTRIBUTIONAL MEASURE OF TAX PROGRESSIVITY

The proposed measure, relative tax share progressivity (RTSP) is as simple and informative as the existing measure, relative income share progressivity (RISP). The two measures are found to be complementary. While the existing measure is better suited for indicating the redistributive effect of the tax, the proposed measure is more suitable for reflecting the progressivity of the tax. The proposed measure facilitates an analysis of the redistributive impact of the tax in terms of tax progressivity and average tax rate, at a disaggregative level. It reveals that despite the sharp decline in progressivity of the personal income tax in India following sharp increases in tax progressivity at the low income levels and sharp reductions in tax progressivity at the high income levels, the redistributive impact of the tax has increased following a rise in the average tax rate with substantial redistribution of income among the high income taxpayers.