Generalized Social Marginal Welfare Weights for Optimal Tax Theory

This paper proposes to evaluate tax reforms by aggregating money metric losses and gains of different individuals using "generalized social marginal welfare weights" Optimum tax formulas take the same form as standard welfarist tax formulas by simply substituting standard marginal social w...

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Bibliographic Details
Published in:The American economic review 2016-01, Vol.106 (1), p.24-45
Main Authors: Saez, Emmanuel, Stantcheva, Stefanie
Format: Article
Language:English
Subjects:
Earnings
Economic reform
Economic theory
Equality
Income taxes
Libertarianism
Measurement techniques
Metric system
Pareto optimum
Poverty
Reforms
Social psychology
Society
Studies
Tax reform
Taxation
Taxes
Utilitarianism
Welfare
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Summary:This paper proposes to evaluate tax reforms by aggregating money metric losses and gains of different individuals using "generalized social marginal welfare weights" Optimum tax formulas take the same form as standard welfarist tax formulas by simply substituting standard marginal social welfare weights with those generalized weights. Weights directly capture society's concerns for fairness without being necessarily tied to individual utilities. Suitable weights can help reconcile discrepancies between the welfarist approach and actual tax practice, as well as unify in an operational way the most prominent alternatives to utilitarianism such as Libertarianism, equality of opportunity, or poverty alleviation.
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.20141362