Personal income tax revenue generation and progressivity for a selection of countries.

The personal income tax is not one of the most despised forms of taxation throughout the world; yet, the personal income tax remains one of the most used tax handles around the world.  For many countries, the income tax is seen as a stable revenue stream, and it is hard to see it disappearing anytime soon.  In this paper, we look at the income tax experiences of five countries: The United States of America, the United Kingdom, Russia, China, and Jamaica.  These countries we believe represent different areas of the globe and as such, serve as a way to compare the experiences of people from diverse cultures and practices, and improve the external validity of our findings.  We look specifically at the level of personal income tax collected relative to the level of GDP.   We use the Urban-Brookings Tax Policy Center’s large-scale microsimulation, the EUROMOD, and simulation models from other countries to access the revenue performance of the income tax.   Also, we use these models to measure the progressivity of income taxes across these countries using Pfähler–Lambert and Kakwani decomposition techniques.  Our findings indicate that the revenue earning potential of the income tax is very similar across the five countries we analyzed.  Not surprisingly, the US federal income tax seemed to be the most progressive of the five countries, but all the income tax systems in the study can be classified as progressive.  In flat income tax structures like Jamaica’s, progressivity of the income tax is possible because of the availability of exemptions for lower income wage earners.