Open AccessEquity: The Effects Of Tax Reform On Progressivity Features Of The Tax Structure
Author(s) -
Julia K. Brazelton,
Caroline D. Strobel,
David L. Ryan
Publication year - 2011
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v7i4.6198
Subject(s) - taxable income , economics , equity (law) , state income tax , econometrics , gross income , tax reform , indirect tax , monetary economics , public economics , accounting , political science , law
The impact of the Tax Reform Act of 1986 (TRA86) on equity is examined using a simulation program and statistical analysis. Specifically, a sample of tax returns was manipulated to calculate taxable income for 1987 and 1988. The results were then compared to determine the degree to which effective and average tax rates changed within discrete income levels. Using both t-test and z statistics, the results confirm the hypothesis that the degree of progressivity has been affected by TRA86. A graphic analysis illustrates this change at various income levels for both the average and effective tax rates. These findings are significant for tax policy decision purposes.