Abstract

http://ssrn.com/abstract=2425225
 


 



Revisiting the Classical View of Benefit-Based Taxation


Matthew Weinzierl


Harvard Business School - Business, Government and the International Economy Unit

March 17, 2015

Harvard Business School BGIE Unit Working Paper No. 14-101

Abstract:     
This paper explores how the persistently popular "classical" logic of benefit based taxation, in which an individual’s benefit from public goods is tied to his or her income-earning ability, can be incorporated into modern optimal tax theory. If Lindahl’s methods are applied to that view of benefits, first-best optimal policy can be characterized analytically as depending on a few potentially estimable statistics, in particular the coefficient of complementarity between public goods and endowed ability. Constrained optimal policy with a Pareto-efficient objective that strikes a balance-controlled by a single parameter-between this principle and the familiar utilitarian criterion can be simulated using conventional constraints and methods. A wide range of optimal policy outcomes can result, including those that match well several features of existing policies. To the extent that such an objective reflects the mixed normative reasoning behind prevailing policies, this model may offer a useful approach to a positive optimal tax theory.

Number of Pages in PDF File: 32


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Date posted: April 17, 2014 ; Last revised: May 23, 2015

Suggested Citation

Weinzierl, Matthew, Revisiting the Classical View of Benefit-Based Taxation (March 17, 2015). Harvard Business School BGIE Unit Working Paper No. 14-101. Available at SSRN: http://ssrn.com/abstract=2425225 or http://dx.doi.org/10.2139/ssrn.2425225

Contact Information

Matthew Weinzierl (Contact Author)
Harvard Business School - Business, Government and the International Economy Unit ( email )
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
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