Revisiting the Classical View of Benefit-Based Taxation
نویسنده
چکیده
This paper explores how the persistently popular "classical" logic of benefit based taxation, in which an individual’s benefit from public goods is tied to his or her income-earning ability, can be incorporated into modern optimal tax theory. If Lindahl’s methods are applied to that view of benefits, first-best optimal policy can be characterized analytically as depending on a few potentially estimable statistics, in particular the coeffi cient of complementarity between public goods and endowed ability. Constrained optimal policy with a Pareto-effi cient objective that strikes a balance—controlled by a single parameter—between this principle and the familiar utilitarian criterion can be simulated using conventional constraints and methods. A wide range of optimal policy outcomes can result, including those that match well several features of existing policies. To the extent that such an objective reflects the mixed normative reasoning behind prevailing policies, this model may offer a useful approach to a positive optimal tax theory.
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