THE EQUAL ABSOLUTE SACRIFICE PRINCIPLE REVISITED

We summarize the literature on equal absolute sacrifice income taxes, and make some extensions. We adapt the utilitarian equal sacrifice criterion to a wide class of rank-dependent social welfare functions, and find that liabilities depend on both income <i>and</i> position in the distribution. We investigate whether such taxes need be progressive, using a combination of analytics and simulation, and in the process uncover tax functions not previously recognized as equating sacrifices. Finally, out of horizontal equity considerations a new concept of 'the equal treatment of equals' by an income tax emerges, with implications for future work whose significance is discussed. Copyright © 2009 Blackwell Publishing Ltd.