| Table 1. Suits Index Estimates of the|
U.S. Tax System, 2001, by Tax Type
|Tax Type||Suits Index|
|Federal Social Insurance||-0.159|
|State and Local||-0.066|
| The Suits Index for state and local|
taxes is based on 2002 data.
The Suits Index, developed by Daniel Suits in the 1970s, calculates a single number that measures tax progressivity. The approach basically compares the cumulative share of income received by taxpayers, ordered from lowest to highest, to their cumulative share of taxes paid. For a progressive (regressive) tax, the share of taxes paid will tend to be less (more) than the share of income as we move up the income spectrum. Other tax progressivity indices have been developed but the Suits Index remains the most widely used approach.
While the calculation details are not presented here, the Suits Index is a number ranging between –1 and +1. A negative Suits Index means that the tax is regressive while a positive index indicates a progressive tax (with a value of zero for a proportional tax). The Suits Index can be used to compare the degree of progressivity of different tax types as well as determine whether a tax becomes more or less progressive over time.
The Suits Index has been used to estimate the progressivity of different tax types in the U.S. for 2001. Table 1 shows that the U.S. tax system contains a mixture of progressive and regressive taxes. The federal estate tax is the most progressive tax while the federal corporate and income taxes are also progressive. On the other hand, federal excise taxes are the most regressive. Federal social insurance taxes and overall state and local taxes are also regressive. When all federal taxes are considered, the Suits Index of 0.144 indicates that federal taxation is progressive. The entire U.S. tax system is also progressive, but the Suits Index of 0.088 is closer to a value of zero (a proportional tax) than just the federal tax system.
- Global Development And Environment Institute, Tufts University