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Optimal taxation under different concepts of justness

Robin Jessen, Maria Metzing () and Davud Rostam-Afschar

No 762, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: A common assumption in the optimal taxation literature is that the social planner maximizes a welfarist social welfare function with weights decreasing with income. However, high transfer withdrawal rates in many countries imply very low weights for the working poor in practice. We extend the optimal taxation framework by Saez (2002) to allow for alternatives to welfarism. We calculate weights of a social planner's function as implied by the German tax and transfer system based on the concepts of welfarism, minimum absolute and minimum relative sacrifice. We find that the minimum absolute sacrifice principle is in line with social weights that decline with net income.

Keywords: justness; optimal taxation; income redistribution; equal sacrifice; inequality; subjective preferences (search for similar items in EconPapers)
JEL-codes: D63 D60 H21 H23 I38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-pbe and nep-pub
Date: 2018
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https://www.econstor.eu/bitstream/10419/182028/1/1030438234.pdf (application/pdf)

Related works:
Working Paper: Optimal Taxation Under Different Concepts of Justness (2018) Downloads
Working Paper: Optimal Taxation under Different Concepts of Justness (2017) Downloads
Working Paper: Optimal taxation under different concepts of justness (2017) Downloads
Working Paper: Optimal taxation under different concepts of justness (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:762

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