Generalized Social Marginal Welfare Weights for Optimal Tax Theory
Emmanuel Saez, Stefanie Stantcheva
American Economic Review · 2016 · Volume 106 · Issue 1
Abstract
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. (JEL D60, D63, H21, H23, I38)
Keywords
Welfare Economics: General, Equity, Justice, Inequality, and Other Normative Criteria and Measurement, Taxation and Subsidies: Efficiency, Optimal Taxation, Taxation and Subsidies: Externalities, Redistributive Effects, Environmental Taxes and Subsidies, Welfare, Well-Being, and Poverty: Government Programs, Provision and Effects of Welfare Programs
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