Generalized Social Marginal Welfare Weights for Optimal Tax Theory / Emmanuel Saez, Stefanie Stantcheva.

Format:

Book

Author/Creator:

Saez, Emmanuel.

Contributor:

National Bureau of Economic Research.

Stantcheva, Stefanie.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18835.

NBER working paper series no. w18835

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2013.

Summary:

This paper proposes a new way to evaluate tax reforms, by aggregating losses and gains of different individuals using "generalized social marginal welfare weights." A tax system is optimal if no budget neutral small reform can increase the weighted sum of (money metric) gains and losses across individuals. Optimum tax formulas take the same form as standard welfarist tax formulas by simply substituting standard marginal social welfare weights with those generalized marginal social welfare weights. Weights directly capture society's concerns for fairness allowing us to cleanly separate individual utilities from social weights. 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.

Notes:

Print version record

February 2013.