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Taxation behind the veil of ignorance

Author

Listed:
  • Biung-Ghi Ju

    (Department of Economics, Seoul National University)

  • Juan D. Moreno-Ternero

    (Department of Economics, Universidad Pablo de Olavide;)

Abstract

We explore the design of impartial tax schemes in a simple setup where agents’ incomes are completely determined by their inborn talents. Building on Harsanyi’s veil-of-ignorance approach, we conceptualize an impartial observer who chooses a tax scheme without know- ing her own preferences and the distribution of talents, and whose vNM preferences behind the veil obey Harsanyi’s principle of acceptance and are independent, in terms of utility-scale, of the distribution of talents. Our results in the resulting framework provide three main messages: (i) the veil of ignorance implies anonymity of tax schemes; (ii) the veil of ignorance generically rejects utilitarian tax schemes; (iii) the veil of ignorance endorses the (Rawlsian) leveling tax scheme.

Suggested Citation

  • Biung-Ghi Ju & Juan D. Moreno-Ternero, 2021. "Taxation behind the veil of ignorance," Working Papers 21.10, Universidad Pablo de Olavide, Department of Economics.
    • Handle: RePEc:pab:wpaper:21.10
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    Cited by:

    1. Klaser, Klaudijo & Mittone, Luigi, 2022. "Can the rawlsian veil of ignorance foster tax compliance? Evidence from a laboratory experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 99-113.
    2. Ricardo Martínez & Juan D. Moreno‐Ternero, 2024. "Redistribution with needs," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 26(1), February.

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    Keywords

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    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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