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Horizontal Equity: New Measures, Unclear Principles

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  • Louis Kaplow

Abstract

Alan Auerbach and Kevin Hassett offer a new measure of horizontal equity (HE) that is designed to overcome deficiencies in prior indexes. There is, however, a fundamental problem that their effort shares with their predecessors' attempts: the underlying rationale for pursuing HE at the expense of individuals' well-being is never stated. Moreover, as discussed here, it appears that no plausible rationale can be given because the essence of HE involves giving weight to morally arbitrary factors. Indeed, pursuing HE may even conflict with the Pareto principle. On reflection, it seems that the appeal of HE is specious: HE does not possess intrinsic value, but rather is a rough proxy concept that may signal various ways in which unequal treatment of individuals can lead to a loss in social welfare. Unfortunately, HE indexes are not very useful even with regard to HE's proxy role.

Suggested Citation

  • Louis Kaplow, 2000. "Horizontal Equity: New Measures, Unclear Principles," NBER Working Papers 7649, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:7649
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    References listed on IDEAS

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    1. Kaplow, Louis, 1995. "A Fundamental Objection to Tax Equity Norms: A Call for Utilitarianism," National Tax Journal, National Tax Association, vol. 48(4), pages 497-514, December.
    2. Kaplow, Louis, 1995. "A Fundamental Objection to Tax Equity Norms: A Call for Utilitarianism," National Tax Journal, National Tax Association;National Tax Journal, vol. 48(4), pages 497-514, December.
    3. Kaplow, Louis, 1996. "How Tax Complexity and Enforcement Affect the Equity and Efficiency of the Income Tax," National Tax Journal, National Tax Association;National Tax Journal, vol. 49(1), pages 135-150, March.
    4. Kaplow, Louis, 1989. "Horizontal Equity: Measures in Search of a Principle," National Tax Journal, National Tax Association, vol. 42(2), pages 139-54, June.
    5. Louis Kaplow, 1985. "Horizontal Equity: Measures in Search of a Principle," NBER Working Papers 1679, National Bureau of Economic Research, Inc.
    6. Kaplow, Louis, 1989. "Horizontal Equity: Measures in Search of a Principle," National Tax Journal, National Tax Association;National Tax Journal, vol. 42(2), pages 139-154, June.
    7. John C. Harsanyi, 1953. "Cardinal Utility in Welfare Economics and in the Theory of Risk-taking," Journal of Political Economy, University of Chicago Press, vol. 61, pages 434-434.
    8. Kaplow, Louis, 1996. "How Tax Complexity and Enforcement Affect the Equity and Efficiency of the Income Tax," National Tax Journal, National Tax Association, vol. 49(1), pages 135-50, March.
    9. Feldstein, Martin, 1976. "On the theory of tax reform," Journal of Public Economics, Elsevier, vol. 6(1-2), pages 77-104.
    10. Kaplow, Louis, 1996. " Optimal Distribution and the Family," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(1), pages 75-92, March.
    11. Louis Kaplow & Steven Shavell, 1999. "Any Non-Individualistic Social Welfare Function Violates the Pareto Principle," NBER Working Papers 7051, National Bureau of Economic Research, Inc.
    12. 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.
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    Cited by:

    1. Eissa, Nada & Hoynes, Hilary Williamson, 2000. "Explaining the Fall and Rise in the Tax Cost of Marriage: The Effect of Tax Laws and Demographic Trends, 1984-97," National Tax Journal, National Tax Association, vol. 53(n. 3), pages 683-712, September.
    2. Ivica Urban, 2009. "Kakwani decomposition of redistributive effect: Origins, critics and upgrades," Working Papers 148, ECINEQ, Society for the Study of Economic Inequality.
    3. Gerlinde Verbist & Wim Van Lancker, 2016. "Horizontal and Vertical Equity Objectives of Child Benefit Systems: An Empirical Assessment for European Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 128(3), pages 1299-1318, September.
    4. Henrik Jordahl & Luca Micheletto, 2005. "Optimal Utilitarian Taxation and Horizontal Equity," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(4), pages 681-708, October.
    5. Sören Blomquist & Luca Micheletto, 2008. "Age-related Optimal Income Taxation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(1), pages 45-71, March.

    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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