Inequality reduction by income taxes: just how much? An investigation for the Netherlands, 1914-1973

Data on the income distribution in the Netherlands since the introduction of the income tax in 1914 are used to calculate the extent of income redistribution through the progressive rate structure. Seven indexes of income equality are used, and their values after-tax are divided by the value before-tax. The extent of inequality reduction differs substantially between inequality indexes. Pearson and Kendall correlation coefficients of the time series are presented and again, the information diverges so widely that one may doubt the usefulness of the conventional summary statistics of income inequality.