Revisiting the Classical View of Benefits-Based Taxation

Matthew Weinzierl ()

No 344, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: Commentary and political rhetoric on taxes in the United States have long included appeals to Smith's (1776) "classical" logic of benefit based taxation in which an individual's benefit from the state is tied to his or her income-earning ability. Modern optimal tax theory, in contrast, largely ignores the principle of benefit based taxation. This paper shows that the classical logic of benefit based taxation can be readily incorporated into the formal structure of modern theory. Moreover, by applying Lindahl's well-known methods, optimal policy according to that principle can be characterized analytically as depending on a few potentially estimable statistics. An objective for policy that gives weight to both this principle and the familiar utilitarian criterion can explain a variety of features of existing policy that are difficult to reconcile in standard theory, consistent with its apparent role in real-world normative reasoning over tax design.

Date: 2014
New Economics Papers: this item is included in nep-acc, nep-hpe and nep-pke
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Related works:
Working Paper: Revisiting the Classical View of Benefit-Based Taxation (2016)
Working Paper: Revisiting the Classical View of Benefit-Based Taxation (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed014:344

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