Utilitarianism and Horizontal Equity: The Case for Random Taxation
AbstractThis paper establishes that, far from being able to derive the principle of horizontal equity from utilitarianism, the principle is actually in- consistent with utilitarianism in a variety of circumstances. We derive conditions under which (a) it is optimal to impose random tax schedules (ex post randomization) ; and (b) it is optimal to randomize the tax schedules imposed on a set of otherwise identical individuals (ex ante randomization). The implications for optimal tax theory are discussed. More generally, it is shown that there are a number of potentially important economic situations with which the principle of horizontal equity may be inconsistent not only with utilitarianism but even with Pareto optimality.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0694.
Date of creation: Jun 1981
Date of revision:
Publication status: published as Stiglitz, Joseph E. "Utilitarianism and Horizontal Equity: The Case for Random Taxation." Journal of Public Economics, Vol. 18, No. 1 (June 1982) pp. 1-33.
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Other versions of this item:
- Stiglitz, Joseph E., 1982. "Utilitarianism and horizontal equity : The case for random taxation," Journal of Public Economics, Elsevier, Elsevier, vol. 18(1), pages 1-33, June.
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Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University
299, Cowles Foundation for Research in Economics, Yale University.
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