The Promise of Positive Optimal Taxation: Normative Diversity and a Role for Equal Sacrifice

72 Pages Posted: 2 Aug 2013 Last revised: 1 Oct 2014

See all articles by Matthew Weinzierl

Matthew Weinzierl

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

Date Written: September 30, 2014

Abstract

A prominent assumption in modern optimal tax research is that the objective of taxation is Utilitarian. I present new survey evidence that most people reject this assumption’s implications for several prominent features of tax policy, instead preferring tax policies based at least in part on a classic alternative objective: the principle of Equal Sacrifice. I generalize the standard model to accommodate this preference for a mixed objective, proposing a method by which to make disparate criteria commensurable while respecting Pareto efficiency. Then, I show that optimal policy in this generalized model, calibrated to the survey evidence and U.S. microdata, is capable of quantitatively matching several features of existing tax policy that are incompatible in the conventional model but widely endorsed in the survey and reality, including the coexistence of substantial redistribution and limited tagging. Together, these findings demonstrate the potential of a positive theory of optimal taxation.

Suggested Citation

Weinzierl, Matthew, The Promise of Positive Optimal Taxation: Normative Diversity and a Role for Equal Sacrifice (September 30, 2014). Journal of Public Economics, Forthcoming; Harvard Business School BGIE Unit Working Paper No. 14-013. Available at SSRN: https://ssrn.com/abstract=2304825 or http://dx.doi.org/10.2139/ssrn.2304825

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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