A Unified Perspective on Efficiency, Redistribution, and Public Policy

Harvard Law School John M. Olin Center Discussion Paper No. 1027

39 Pages Posted: 9 Feb 2020

See all articles by Louis Kaplow

Louis Kaplow

Harvard Law School; National Bureau of Economic Research (NBER)

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Date Written: January 13, 2020

Abstract

Specialized theoretical and empirical research should in principle be embedded in a unified framework that identifies the relevant interactions among different phenomena, enables an appropriate matching of policy instruments to objectives, and grounds normative analysis in individuals’ utilities and a social welfare function. This article advances an approach that both provides integration across many dimensions and contexts and also identifies which tasks may be undertaken separately and how such analysis should be conducted so as to be consistent with the underlying framework. It employs the distribution-neutral methodology and welfare analysis developed in Kaplow (2008a) and related work, offering applications to income taxation, commodity taxation, tax expenditures, externalities, public goods, capital income and wealth taxation, social security and retirement savings, estate and gift taxation, and transfer programs. It also explores welfare criteria and examines how their consideration enables the normative analysis of the taxation of families, heterogeneous preferences, and tax administration and enforcement.

Keywords: Income taxation, optimal taxation, inequality, efficiency, redistribution, commodity taxation, public goods, externalities, tax expenditures, capital taxation, wealth taxation, estate and gift taxation, social insurance, transfer programs, welfarism, taxation of families

JEL Classification: D61, D62, D63, H20, H21, H23, H24, H26, H41, H43, H53, H55

Suggested Citation

Kaplow, Louis, A Unified Perspective on Efficiency, Redistribution, and Public Policy (January 13, 2020). Harvard Law School John M. Olin Center Discussion Paper No. 1027. Available at SSRN: https://ssrn.com/abstract=3518787 or http://dx.doi.org/10.2139/ssrn.3518787

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