Benefit-Based Taxation can Include Substantial Redistribution

Jo Ellery and Matthew Weinzierl

No 35429, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Contrary to a long-standing concern, we present evidence that classical benefit-based labor income taxation in the tradition of Smith (1776) is consistent with income redistribution through transfers and negative average tax rates both theoretically and---in plausibly-specified simulations---quantitatively at levels which reflect U.S. policy over the past several decades. As redistribution is widespread in practice, our results remove an obstacle to the benefit principle’s plausibility as a prevailing normative foundation of tax policy.

JEL-codes: H20 H21 (search for similar items in EconPapers)
Date: 2026-07
Note: PE
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