# Suits index > Mediated Wiki article. Canonical URL: https://mediated.wiki/source/Suits_index > Markdown URL: https://mediated.wiki/source/Suits_index.md > Source: https://en.wikipedia.org/wiki/Suits_index > Source revision: 1323252841 > License: Creative Commons Attribution-ShareAlike 4.0 International (https://creativecommons.org/licenses/by-sa/4.0/) {{Short description|Measure of tax progressiveness}} The '''Suits index''' of a public policy is a measure of tax progressiveness,{{cite journal |last=Suits |first=Daniel B. |year=1977 |title=Measurement of Tax Progressivity |journal=[American Economic Review](/source/American_Economic_Review) |volume=67 |issue=4 |pages=747–752 |jstor=1813408}} named for [economist](/source/economist) [Daniel B. Suits](/source/Daniel_B._Suits). Similar to the [Gini coefficient](/source/Gini_coefficient), the Suits index is calculated by comparing the area under the [Lorenz curve](/source/Lorenz_curve) to the area under a proportional line.{{cite book |last=B.N. |first=Mandal |date=1 Jan 2009 |title=Global Encyclopaedia of Welfare Economics |url=https://books.google.com/books?id=wDLwD5LpXcIC&dq=Suits+index++richest+person+pays+all+the+tax&pg=PA282 |page=282 |publisher=Global Vision Publishing Ho |isbn=9788182202597 |access-date=December 5, 2013}} For a [progressive tax](/source/progressive_tax) (for example, where higher income tax units pay a greater fraction of their [income](/source/income) as tax), the Suits index is positive. A [proportional tax](/source/proportional_tax) (for example, where each unit pays an equal fraction of income) has a Suits index of zero, and a [regressive tax](/source/regressive_tax) (for example, where lower income tax units pay a greater fraction of income in tax) has a negative Suits index.{{cite web|url=http://ntj.tax.org/wwtax/ntjrec.nsf/175d710dffc186a385256a31007cb40f/b9cabee3cd8394fe85256d8d006ff8f4/$FILE/A06.pdf|archive-url=https://web.archive.org/web/20070927043641/http://ntj.tax.org/wwtax/ntjrec.nsf/175d710dffc186a385256a31007cb40f/b9cabee3cd8394fe85256d8d006ff8f4/$FILE/A06.pdf|url-status=dead|archive-date=2007-09-27|title=Confidence Intervals for the Suits Index|publisher=National Tax Journal|date=March 2003|access-date=2007-05-16}} A theoretical tax where the richest person pays all the tax has a Suits index of 1, and a tax where the poorest person pays everything has a Suits index of −1. Tax preferences (credits and deductions) also have a Suits index.[http://www.fcs.edu.uy/archivos/0911.pdf Distributive impacts of alternative tax structures. The case of Uruguay], Retrieved December 5, 2013 == Types of tax == === Income tax === By definition, a [flat income tax](/source/flat_income_tax) has a Suits index of zero. However, almost all [income tax](/source/income_tax) systems allow for some amount of income to be earned without tax (an [exemption](/source/tax_exemption) amount) to avoid collecting tax from very low income units. Also, most income tax systems provide for higher [marginal tax rates](/source/marginal_tax_rates) at higher income. These effects combine to make income taxes generally progressive, and therefore have a positive Suits index. === Sales tax === [Sales tax](/source/Sales_tax)es are generally charged on each purchase, with no low income exemption. Additionally, lower income tax units generally spend a greater proportion of income on taxable purchases, while higher income units will save or invest a larger part of income. Therefore, sales taxes are generally regressive, and have a negative Suits index. === Excise taxes === [Excise tax](/source/Excise_tax)es are typically charged on items like gasoline, alcohol or tobacco products. Since the tax rate is typically high, and there is a practical limit to the amount of product that can be consumed, this tax is generally more regressive and has a very negative Suits index. ==Properties== The Suits index has the useful property that the total Suits index of a group of taxes or policies is the revenue-weighted sum of the individual indexes. The Suits index is also related closely to the Gini coefficient. While a Gini coefficient of zero means that everyone receives the same income or benefit as a per capita value, a Suits index of zero means that each person pays the same tax as a percentage of income. Additionally, a [poll tax](/source/poll_tax) has a Suits index equal to the negative of the Gini coefficient for the same group. == Examples == {| class="wikitable" |+ Suits index by tax in Minnesota, 2004{{cite web |publisher=Minnesota Budget Project |title=Tax Fairness Declining in Minnesota: Explaining the 2007 Tax Incidence Study |url=http://www.mnbudgetproject.org/research-analysis/minnesota-taxes/tax-system/2007-tax-incidence |date=April 2007 |url-status=dead |archive-url=https://web.archive.org/web/20160807043230/http://www.mnbudgetproject.org/research-analysis/minnesota-taxes/tax-system/2007-tax-incidence |archive-date=2016-08-07 |access-date=2023-03-24}} |- ! Tax ! Suits index |- |- | Estate tax | 0.270 |- | Individual income tax | 0.219 |- | State taxes only | 0.026 |- | '''Total state and local taxes''' | −0.024 |- | Alcoholic beverage excise tax | −0.083 |- | Residential property taxes including impact of property tax refunds | −0.103 |- | Mortgage and deed taxes | −0.130 |- | Statewide property tax | −0.131 |- | Motor vehicle sales tax | −0.142 |- | Corporate franchise tax | −0.145 |- | Motor vehicle registration tax | −0.147 |- | General sales and use taxes | −0.175 |- | General property taxes | −0.178 |- | Local taxes only | −0.178 |- | Residential property taxes without impact of property tax refunds | −0.180 |- | Motor fuels excise tax (gas tax) | −0.253 |- | MinnesotaCare taxes | −0.271 |- | Gambling taxes | −0.477 |- | Cigarette and tobacco excise taxes | −0.486 |} {| class="wikitable" |+ Suits index by tax in Texas, 2007{{cite web |publisher=[Center for Public Policy Priorities](/source/Center_for_Public_Policy_Priorities) |url=http://www.cppp.org/files/7/POP%20284%20taxincidence.pdf |title=Who Pays Texas Taxes? |date=2007-03-20 |access-date=2023-03-24}} |- ! Tax ! Suits index |- | Natural gas tax | 0.001 |- | School property tax | −0.06 |- | Franchise tax | −0.11 |- | Motor vehicle sales tax | −0.14 |- | Sales tax | −0.18 |- | Gasoline tax | −0.25 |} == See also == * [Kakwani index](/source/Kakwani_index) == References == {{Reflist}} Category:Welfare economics Category:Economic indicators Category:Fiscal policy Category:Index numbers --- Adapted from the Wikipedia article [Suits index](https://en.wikipedia.org/wiki/Suits_index) by Wikipedia contributors ([contributor history](https://en.wikipedia.org/wiki/Suits_index?action=history)). Available under [Creative Commons Attribution-ShareAlike 4.0 International](https://creativecommons.org/licenses/by-sa/4.0/). Changes may have been made.