This article investigates the effects of distributionally neutral tax changes on equity
and efficiency using computational general equilibrium and stochastic dominance
techniques. The authors find, for a tax increase, that the constant-tax-share definition
is preferred both in terms of efficiency and equity for a wide range of values of the
elasticity of labor supply. For a tax decrease, the constant-after-tax-income definition dominates. For low elasticities of labor supply, no general welfare conclusions
can be drawn, but under reasonable assumptions the constant-tax-share definition
would be approved by a risk-averse median voter.
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