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A Fundamental Objection to Tax Equity Norms: A Call for Utilitarianism

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  • Louis Kaplow

Abstract

Anti-utilitarian norms often are used in assessing tax systems. Two motivations support this practice. First, many believe utilitarianism to be insufficiently egalitarian. Second, utilitarianism does not give independent weight to other equitable principles, notably concerns that reforms may violate horizontal equity or result in rank reversals in the income distribution. This investigation suggests that a policy maker who believes in the Pareto principle -- that any reform preferred by everyone should be adopted - - cannot consistently adhere to any of these anti-utilitarian sentiments. Moreover, the affirmative case for utilitarian tax policy assessment is stronger than is generally appreciated.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4961.

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Date of creation: Dec 1994
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Publication status: published as National Tax Journal, vol. 48, no. 4, pp. 497-514, (1995).
Handle: RePEc:nbr:nberwo:4961

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  1. Ng, Yew-Kwang, 1971. "The Possibility of a Paretian Liberal: Impossibility Theorems and Cardinal Utility," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 79(6), pages 1397-1402, Nov.-Dec..
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Cited by:
  1. Olof Johansson-Stenman & Fredrik Carlsson & Dinky Daruvala, 2002. "Measuring Future Grandparents" Preferences for Equality and Relative Standing," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(479), pages 362-383, April.
  2. Louis Kaplow, 1995. "How Tax Complexity and Enforcement Affect the Equity and Efficiency of The Income Tax," NBER Working Papers 5391, National Bureau of Economic Research, Inc.
  3. Duclos, Jean-Yves & Jalbert, Vincent & Araar, Abdelkrim, 2003. "Classical Horizontal Inequity and Reranking: an Integrating Approach," Cahiers de recherche, CIRPEE 0306, CIRPEE.
  4. Henrik Jordahl & Luca Micheletto, 2003. "Optimal Utilitarian Taxation and Horizontal Equity," CESifo Working Paper Series 977, CESifo Group Munich.
  5. Jean-Yves Duclos & Vincent Jalbert & Abdelkrim Araar, 2001. "Classical Horizontal Inequity and Reranking: an Integrated Approach," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 478.01, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  6. Louis Kaplow & David Weisbach, 2011. "Discount rates, social judgments, individuals’ risk preferences, and uncertainty," Journal of Risk and Uncertainty, Springer, Springer, vol. 42(2), pages 125-143, April.
  7. Blomquist, Sören & Micheletto, Luca, 2003. "Age Related Optimal Income Taxation," Working Paper Series, Uppsala University, Department of Economics 2003:7, Uppsala University, Department of Economics.
  8. Johansson-Stenman, Olof & Carlsson, Fredrik & Daruvala, Dinky, 2001. "Measuring Hypothetical Grandparents Preferences For Equality And Relative Standings," Working Papers in Economics, University of Gothenburg, Department of Economics 42, University of Gothenburg, Department of Economics.
  9. Louis Kaplow, 2003. "Transition Policy: A Conceptual Framework," NBER Working Papers 9596, National Bureau of Economic Research, Inc.
  10. Johansson-Stenman, Olof, 2001. "Should We Use Distributional Weights in CBA When Income Taxes Can Deal with Equity?," Working Papers in Economics, University of Gothenburg, Department of Economics 35, University of Gothenburg, Department of Economics.

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