Revisiting the Classical View of Benefit-Based Taxation

Matthew Weinzierl ()

No 20735, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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 coefficient of complementarity between public goods and innate talent. Constrained optimal policy with a Pareto-efficient 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.

JEL-codes: D63 H21 H41 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-pbe and nep-pub
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Citations: View citations in EconPapers (6)

Published as Matthew Weinzierl, 2018. "Revisiting the Classical View of Benefit-based Taxation," The Economic Journal, vol 128(612), pages F37-F64.

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Related works:
Working Paper: Revisiting the Classical View of Benefit-Based Taxation (2016)
Working Paper: Revisiting the Classical View of Benefits-Based Taxation (2014)
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