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Optimal income taxation theory and principles of fairness

Author

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  • FLEURBAEY Marc

    (Princeton University)

  • MANIQUET François

    (Université catholique de Louvain, CORE, Belgium)

Abstract

The achievements and limitations of the classical theory of optimal labor-income taxation based on social welfare functions are now well known. Even though utili-tarianism still dominates public economics, recent interest has arisen for broadening the normative approach and making room for fairness principles such as desert or responsibility. Fairness principles sometimes provide immediate recommendations about the relative weights to assign to various income ranges, but in general require a careful choice of utility representations embodying the relevant interpersonal com-parisons. The main message of this paper is that the traditional tool of welfare economics, the social welfare function framework, is exible enough to incorporate many approaches, from egalitarianism to libertarianism.

Suggested Citation

  • FLEURBAEY Marc & MANIQUET François, 2017. "Optimal income taxation theory and principles of fairness," LIDAM Discussion Papers CORE 2017012, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:2017012
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    File URL: https://sites.uclouvain.be/core/publications/coredp/coredp2017.html
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    Keywords

    Optimal taxation; fair social orderings;

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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