ABSTRACT
Taxes affect real income in either or both of two ways: they may reduce the incomes of individuals in their role as producers; or they may increase the prices of consumer goods and thus reduce the purchasing power of a given amount of money income. The relative tax burdens imposed on income from labour and from capital also depend on the incidence assumptions for the corporation income tax and the property tax. The decline in the progressivity of the tax system was caused by a decline in the progressivity of federal taxes. In 1966 the tax burden on capital income was substantially higher than the burden on the labour income. This pattern was reversed by 1985 as a result of the reduced roles of the corporation income tax and the property tax and the greater role of the payroll tax.
