Dalton-Improving Indirect Tax Reform

A tax reform is "Dalton-improving" if it improves social welfare for all possible social-welfare functions that conform to Dalton's principle of transfers. According to this principle, there exists a prior social ranking of households, and a transfer is approved if it distributes from...

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Bibliographic Details
Published in:The American economic review 1995-09, Vol.85 (4), p.793-807
Main Authors: Mayshar, Joram, Yitzhaki, Shlomo
Format: Article
Language:English
Subjects:
Commodities
Direct taxes
Economic models
Excise taxes
Expenditures
Family income
Households
Income redistribution
Income taxes
Indirect taxation
Indirect taxes
Ratings & rankings
Reforms
Revenue
Studies
Tax rates
Tax reform
Tax revenues
Taxation
Welfare economics
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Summary:A tax reform is "Dalton-improving" if it improves social welfare for all possible social-welfare functions that conform to Dalton's principle of transfers. According to this principle, there exists a prior social ranking of households, and a transfer is approved if it distributes from high-ranking ("rich") to low-ranking ("poor") households, without altering the ranking itself. In this paper we develop a procedure for identifying marginal Dalton-improving reforms in the context of indirect taxation. The methodology is illustrated using data on excise taxes in the United Kingdom.
ISSN:0002-8282
1944-7981