Optimal Redistributive Taxation when Governmentâ€™s and Agentsâ€™ Preferences Differ
Paternalism, merit goods and specific egalitarianism are concepts we sometimes meet in the literature. The thing in common is that the policy maker does not fully respect the consumer sovereignty principle and designs policies according to some other criterion than individualsâ€™ preferences. Using the self-selection approach to tax problems developed by Stiglitz (1982) and Stern (1982), the paper provides a characterization of the properties of an optimal redistributive mixed tax scheme in the general case when the government evaluates individualsâ€™ well-being using a different utility function than the one maximized by private agents.
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