Generalized Social Marginal Welfare Weights Imply Inconsistent Comparisons of Tax Policies
American Economic Review · 2024 · Volume 114 · Issue 11
Abstract
This paper concerns Saez and Stantcheva's (2016) generalized social marginal welfare weights, which aggregate losses and gains due to tax policies while incorporating nonutilitarian ethical considerations. The approach evaluates local tax changes without a global social objective. I show that local tax policy comparisons implicitly entail global comparisons. Moreover, whenever welfare weights do not have a utilitarian structure, these implied global comparisons are inconsistent. I argue that broader ethical values cannot in general be represented simply by modifying the weights placed on benefits to different people, and a more thoroughgoing modification of the utilitarian approach is required.
Keywords
Welfare Economics: General, Equity, Justice, Inequality, and Other Normative Criteria and Measurement, Social Choice, Clubs, Committees, Associations, Taxation and Subsidies: Efficiency, Optimal Taxation, Taxation and Subsidies: Externalities, Redistributive Effects, Environmental Taxes and Subsidies, General Welfare, Well-Being
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