Understanding Different Approaches to Benefit-Based Taxation

23 Pages Posted: 10 Sep 2019

See all articles by Robert Scherf

Robert Scherf

Harvard University - Business School (HBS)

Matthew Weinzierl

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

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Date Written: August 15, 2019

Abstract

The normative principle of benefit-based taxation has exerted substantial influence on many areas of public finance, but it has been largely set aside in the modern theoretical approach to optimal income taxation, where welfarist objectives dominate. A prerequisite for that gap to close is the clarification of what benefit-based income taxation would mean, specifically in a first-best setting. This paper seeks to provide clear, accessible descriptions and novel graphical representations of four major approaches to first-best benefit-based taxation, explain how these approaches relate to each other, and apply them within the Classical Benefit-Based framework for optimal income taxation of Smith (1776).

Suggested Citation

Scherf, Robert and Weinzierl, Matthew, Understanding Different Approaches to Benefit-Based Taxation (August 15, 2019). Harvard Business School BGIE Unit Working Paper No. 19-070 (2019), Available at SSRN: https://ssrn.com/abstract=3450804 or http://dx.doi.org/10.2139/ssrn.3450804

Robert Scherf

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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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