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The United States derives from a global income tax model under which it taxes it citizens and permanent residents on all their worldwide income without regard to the source of that income. Under a pure global model, the United States would combine income and deductions in a single tax computation. Other countries including Germany and Sweden originate in schedular income tax models under which the tax system classifies income by type, matches it with deductions from the same class, and computes a separate tax on each class. Neither the United States’ global model nor Germany’s or Sweden’s schedular models are free from elements of the other model.

The principles of horizontal and vertical equity underlie the development of both global and schedular tax systems in advanced economies. Horizontal equity seems an indisputable precept. The horizontal equity principle is straightforward. It requires that like taxpayers incur like tax burdens. The principle of vertical equity led to the development of the progressive rate structures. Its application and limitations have proven to be more of a challenge than horizontal equity. Vertical equity departs from the principle that as one’s income or, possibly, wealth, increases, one can and should contribute more of that income to supporting governmental services. The wealthier one is, the less likely it is that an increased tax burden will diminish the individual’s welfare in any material way. Conversely, the less wealthy one is, the more likely it is that an increased tax burden will diminish the individual’s welfare materially.

This paper exposes the embedded schedularity of the United States federal income tax system. The system is schedular in the three principal areas of investment income, personal services income, and tax free income. The paper compares and contrasts these schedular areas with features of schedular tax systems like Sweden or Germany, primarily Sweden, and seeks to ascertain whether each schedular feature enhances or undercuts horizontal and vertical equity of the income taxes. The paper observes that Congress has used schedular elements to accomplish distributional policy goals, initially in order to protect progressivity, but more recently that usage has shifted to increase overall regressivity in taxation. The paper concludes that United States taxation seems to be moderately schedular and that schedularity in the United States contributes to regressivity in taxation.