Dual income tax system reduces inequality by redistributing labor and capital income.
The article explores how a dual income tax system affects inequality by combining progressive taxes on wages with proportional taxes on capital income. By analyzing real tax data from Norway, the researchers found conditions where inequality is reduced and identified how income redistribution between labor and capital plays a role. The study shows that the relationship between wage and capital income distributions, the level of tax differentiation in the system, and changes in taxpayers' rankings can complicate the analysis.