any non welfarist method of policy assessment violates the pareto principle reply the public at large many policymakers and a number of economists hold views of social welfare that are non welfarist that is they attach some importance to factors other than the effects of policies on individuals utilities we show however that any non welfarist method of policy assessment violates the pareto principle

revealed social preferences of dutch political parties we measure the redistributive preferences of dutch political parties using unique detailed information from their election proposals by employing the inverse optimal tax method we calculate the political weights across the income distribution for each political party we find that all dutch political parties give a higher political weight to middle incomes than to the poor moreover the political weights of the rich are close to zero furthermore we detect a strong political status quo bias as the political weights of all political parties hardly deviate from the weights implied by the pre existing tax system we argue that political economy considerations are key in understanding these results

risk perceptions and distributional judgments abstract we examine the role of laboratory questionnaire experiments and recent applied empirical research on attitudes in understanding the relationships between people s perceptions of inequality and their perceptions of risk we consider risk in three interpretations in vacuo in day to day life and in the original position

popular acceptance of inequality due to innate brute luck and support for classical benefit based taxation abstract u s survey respondents views on distributive justice differ in two specific related ways from what is conventionally assumed in modern optimal tax research when expressing their preferences over allocations in stylized hypothetical scenarios meant to isolate key features of the tax problem a large share of respondents resist the full equalization of unequal outcomes due to innate brute luck that standard analyses recommend a similar share prefer a classical benefit based logic for taxes over the conventional logic of diminishing marginal social welfare moreover these two views are linked respondents who more strongly resist equalization are more likely to prefer the classical benefit based principle though the amazon mechanical turk survey population is not a representative sample of the u s population robustness of these results across demographic traits and political views suggests that a large share of the american public holds views inconsistent with standard welfarist objectives

perception theoretic foundations of weighted utilitarianism we provide a microfoundation for a weighted utilitarian social welfare function that reflects common moral intuitions about interpersonal comparisons of utilities if utility is only ordinal in the usual microeconomic sense interpersonal comparisons are meaningless nonetheless economics often adopt utilitarian welfare functions assuming that comparable utility functions can be calibrated using information beyond consumer choice data we show that consumer choice data alone are sufficient as suggested by edgeworth 1881 just noticeable differences jnds provide a common unit of measure for interpersonal comparisons of utility differences we prove that a simple monotonicity axiom implies a weighted utilitarian aggregation of preferences with weights proportional to individual jnds

positive and normative judgments implicit in u s tax policy and the costs of unequal growth and recessions calculating the welfare implications of changes to economic policy or shocks requires economists to decide on a normative criterion one approach is to elicit the relevant moral criteria from real world policy choices converting a normative decision into a positive inference as in the recent surge of inverse optimum research we find that capitalizing on the potential of this approach is not as straightforward as we might hope we perform the inverse optimum inference on u s tax policy from 1979 through 2010 and argue that the results either undermine the normative relevance of the approach or challenge conventional assumptions upon which economists routinely rely when performing welfare evaluations

china s membership in the world trade organization wto and the exports of the developing economies of east asia a computable general equilibrium approach there is a general perception particularly among the developing countries of east asia that china s wto membership would spell bad news for their exports the asean countries in particular are quite concerned about its likely negative impact on their export and growth potentials in this light the main objective of this paper is to empirically assess the trade implications of china s wto membership for these countries only few studies using a computable general equilibrium cge approach have addressed the issue of china s wto membership trade implications further these studies have not adequately addressed the issue from the perspective of the developing countries of east asia particularly the asean countries using the latest version of the global trade analysis project gtap model and based on the latest tariff reduction commitments by china the results showed that contrary to the current perception and previous studies almost all of the developing countries of east asia are likely to benefi

does wto accession matter for the chinese textile and clothing industry based on field surveys conducted in guangdong zhejiang and beijing in 2000 and 2001 this paper argues that accession to the world trade organisation wto by china will create a new competitive arena for different categories of textile and clothing firms located in that country partly dependent on the size and ownership of the firm from the perspectives of reducing import tariffs eliminating export quotas and the regulations on trade disputes wto accession does matter for the majority of chinese firms in this win lose game from the perspective of compliance with international standards this paper argues that accession to the wto does not really matter for some chinese firms as they may not survive the intense competition prior to 2005 when the effects of the agreement on textiles and clothing materialise

using elasticities to derive optimal income tax rates this paper derives optimal income tax formulas using compensated and uncompensated elasticities of earnings with respect to tax rates a simple formula for the high income optimal tax rate is obtained as a function of these elasticities and the thickness of the top tail of the income distribution in the general non linear income tax problem this method using elasticities shows precisely how the different economic effects come into play and which are the key relevant parameters in the optimal income tax formulas of mirrlees the optimal non linear tax rate formulas are expressed in terms of elasticities and the shape of the income distribution these formulas are implemented numerically using empirical earning distributions and a range of realistic elasticity parameters

revisiting the classical view of benefit based taxation this paper explores how the persistently popular classical logic of bene t based taxation in which an individual s bene t 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 bene ts rst best optimal policy can be characterized analytically as depending on a few potentially estimable statistics in particular the coe cient of complementarity between public goods and innate talent constrained optimal policy with a pareto e 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 re ects the mixed normative reasoning behind prevailing

measuring economic efficiency using inverse optimum weights abstract this paper provides a method to measure the traditional kaldor hicks notion of economic efficiency when taxes affect behavior in contrast to traditional unweighted surplus measuring efficiency requires weighting individual benefits or surplus by the marginal cost to the government of providing a 1 transfer at each income level these weights correspond to the solution to the inverse optimum program in the optimal tax literature they are the social planning weights that would rationalize the status quo tax schedule as optimal i estimate the weights using the universe of us income tax returns from 2012 the results suggest that measuring economic efficiency requires weighting surplus accruing to the poor roughly 1 5 2 times more than surplus accruing to the rich this is because 1 of surplus to the poor can be turned into roughly 1 5 2 of surplus to the rich by reducing the progressivity of the tax schedule following kaldor and hicks original applications i compare income distributions over time in the us and across countries the results suggest us economic growth is 15 20 lower due to increased inequality than is suggested by changes in gdp because of its higher inequality the u s is unable to replicate the income distribution of countries like austria and the netherlands despite having higher national income per capita

how should capital be taxed this survey discusses how capital should be taxed in advanced economies we review the theoretical optimal tax literature survey empirical studies on the distribution of capital and the distortion

optimal incentives for labor force participation abstract optimal taxation is analyzed under a rawlsian criterion in an economy where the only decision of the agents is to participate or not to the labor force the model allows for heterogeneity both in the agent s productivities and aversions to work at a first best optimal schedule the marginal agent who decides to work pockets all of her productivity while being just compensated for her work aversion when the planner does not observe work aversion financial compensation for work is lower than productivity theory puts little restrictions on the shape of the optimal tax schedules the usual first order conditions involving the elasticities of participation only apply for sufficiently regular economies we qualitatively show how the optimal incentive schemes depend on the underlying structure of the preferences 100 marginal tax rates or subsidies to work are related to specific features of the economies

how elastic are preferences for redistribution evidence from randomized survey experiments we analyze randomized online survey experiments providing interactive customized information on us income inequality the link between top income tax rates and economic growth and the estate tax the treatment has large effects on views about inequality but only slightly moves tax and transfer policy preferences an exception is the estate tax informing respondents of the small share of decedents who pay it doubles support for it the small effects for all other policies can be partially explained by respondents low trust in government and a disconnect between concerns about social issues and the public policies meant to address them jel d31 d72 h23 h24

a theory of optimal inheritance taxation this paper derives optimal inheritance tax formulas that a capture the key equityeciency trade o b are expressed in terms of estimable sucient statistics c are robust to the underlying structure of preferences we consider dynamic stochastic models with general and heterogeneous bequest tastes and labor productivities we limit ourselves to simple but realistic linear or two bracket tax structures to obtain tractable formulas we show that long run optimal inheritance tax rates can always be expressed in terms of distributional parameters aggregate behavioral elasticities and social preferences for redistribution importantly those results carry over with tractable modications to a the case with social discounting instead of steady state welfare maximization b the case with partly accidental bequests c the standard barro becker dynastic model in all cases the optimal inheritance tax rate increases with the concentration of bequest received and decreases with the elasticity of aggregate bequests to the net of tax rate the optimal tax rate is positive and quantitatively large if concentration is high the elasticity is low and society cares mostly about those receiving little inheritance in contrast the optimal tax rate is negative when society cares mostly about inheritors we propose a calibration using micro data for france and the united states we nd that for realistic parameters

pensions in labor contracts this paper con siders the optimality of a two period employment contract between a firm and a worker in which the firm provides the employee with insurance against states of low consumption with a wage pension payment schedule contingent upon the worker s productivity and state of employment the paper shows that with endogenous quits and dismissals the equilibrium pension plan could either impose vesting requirements or provide for severance pay depending on the relative perceptions of the probability of separation by the two parties the worker s productivi ty in each state of employment and the firm s policy regarding emplo yee retention copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

social mobility and redistributive politics just like economists voters have conflicting views about redistributive taxation because they estimate its incentive costs differently we model rational agents as trying to learn from their dynastic income mobility experience the relative importance of effort and predetermined factors in the generation of income inequality and therefore the magnitude of these incentive costs in the long run left wing dynasties believing less in individual effort and voting for more redistribution coexist with right wing dynasties this allows us to explain why individual mobility experience and not only current income matters for political attiitudes and how persistent differences in perceptions about social mobility can generate persistent differences in redistribution across countries

do americans want to tax wealth evidence from online surveys abstract a vast theoretical literature in public finance has studied the desirability of capital taxation this discussion largely ignores the political feasibility of taxing wealth we provide to our knowledge the first investigation of individuals preferences over jointly taxing income and wealth we provide subjects with a set of hypothetical individuals incomes and wealth and elicit subjects preferred absolute tax bill for each individual our method allows us to unobtrusively map both income earned and accumulated wealth into desired tax levels our regression results yield roughly linear desired tax rates on income of about 14 respondents suggested tax rates indicate positive desired wealth taxation when we distinguish between sources of wealth we find that in line with recent theoretical arguments subjects implied tax rate on wealth is 3 when the source of wealth is inheritance far higher than the 0 8 rate when wealth is from savings textual analysis of respondents justifications for their tax rates imply limited concern for the elasticity of tax bases with respect to net of tax rates

the value of tax progressivity evidence from survey experiments abstract the aim of this paper is to investigate how people value tax progressivity more precisely i study the potential trade off between any improvement in the final income distribution and the progressivity of the tax schedule to do this i designed survey experiments in which respondents were asked to rank or to choose between different taxation redistribution schemes with different treatments varying in terms of information availability 1 when only information about final incomes is provided and 2 when information about average tax rates is also available using a within subject design the instability of rankings between 1 and 2 indicates whether or not respondents value tax progressivity i find that information about tax rates significantly affects respondents judgments about tax schemes they exhibit a strong preference for tax progressivity i e they accept a fall in the quality of the final income distribution in exchange for progressive taxation the results of an additional treatment suggest that the mere fact of providing new information cannot account for this finding

how did distributional preferences change during the great recession abstract to better understand how support for redistributive policies is shaped by macroeconomic shocks we explore how distributional preferences changed during the recent great recession we conducted identical modified dictator games during both the recession and the preceding economic boom the experiments capture subjects selfishness the weight on one s own payoff and equality efficiency tradeoffs concerns for reducing differences in payoffs versus increasing total payoffs which we then compare across economic conditions subjects exposed to recession exhibit greater selfishness and higher emphasis on efficiency relative to equality reproducing recessionary conditions inside the laboratory by confronting subjects with possible negative payoffs weakly intensifies selfishness and increases efficiency orientation bolstering the interpretation that differing economic circumstances drive our results

the marginal cost of public funds hours of work versus labor force participation this paper extends the theory and measurement of the marginal cost of public funds mcf to account for labor force participation responses our work is motivated by the emerging consensus in the empirical literature that extensive participation responses are more important than intensive hours of work responses in the modelling of extensive responses we argue that it is crucial to account for the presence of non convexities created by fixed work costs in a non convex framework tax and transfer reforms give rise to discrete participation responses generating first order effects on government revenue these revenue effects make the marginal cost of funds higher and we show numerically that the implications for mcf tend to be substantial

optimal taxation when people do not maximize well being abstract i derive the optimal nonlinear income tax when individuals do not necessarily maximize their own well being this generates a corrective argument for taxation optimal marginal taxes are higher lower if individuals work too much too little from a well being point of view i allow for multidimensional heterogeneity and derive the optimal tax schedule in terms of measurable sufficient statistics one of these statistics measures the degree to which individuals fail to optimize their labor supply i empirically estimate this by using british life satisfaction data as a measure of well being i find that low income workers tend to work too little and high income workers too much providing a motive for lower marginal tax rates at the bottom and higher marginal tax rates at the top of the income distribution

comment on positive and normative judgments implicit in u s tax policy and the costs of unequal growth and recessions by benjamin lockwood and matthew weinzierl

optimal non linear income taxation for the alleviation of income poverty there has been much discussion recently of structuring tax and transfer programs to ensure that resources go to the poor with minimal leaks to the nonpoor the poor have no incentive to earn income with 100 percent marginal tax rates but how high or low the marginal rate of taxation should be and how they should vary with income is a complex issue and opinions vary social security schemes that withdraw benefits represent an extremely high effective marginal tax rate other schemes call for relatively low marginal tax rates at the bottom of the income distribution which tax transfer schedule does most to reduce poverty the issue is one of optimal nonlinear income taxation the authors show that one of the key theoretical results of the welfarist literature is overturned if it is desirable for everybody to work the optimal marginal tax rate on the very poorest individuals is strictly negative they argue that the nonwelfarist perspective points toward lower marginal tax rates in the lower part of the income distribution than does the welfarist perspective but numerical simulations suggest that the effect is of limited quantitative significance using conventional functional forms and parameter values optimal marginal tax rates on the poor are in the 60 70 percent range

understanding welfare stigma taxpayer resentment and statistical discrimination abstract welfare stigma is widely regarded to be of central importance in understanding the impact of welfare programs in their goal of alleviating poverty it affects both the decision to take up benefits and the well being of those who actually do this paper develops alternative models of the determinants of welfare stigma we identify two views a statistical discrimination approach and a taxpayer resentment view we discuss how each may be formalized and derive their implications we then examine what they imply about the relationship between stigma and program design

the elasticity of taxable income with respect to marginal tax rates a critical review this paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates using tax return data first we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis we discuss what other parameters should be estimated when the elasticity is not a sufficient statistic second we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the united states to illustrate those issues third we provide a critical discussion of selected empirical analyses of the elasticity of taxable income in light of the theoretical and empirical framework we laid out finally we discuss avenues for future research jel h24 h31 j22

a new measure of horizontal equity in this paper we propose a new measure of horizontal equity that overcomes many of the shortcomings of previous proposed measures our starting point is the observation that a well behaved social welfare function need not evaluate global vertical equity differences in after tax income using the same weights it applies to local horizontal equity differences even though this constraint has been applied in the past following work on the structure of individual preferences we show that a social welfare function can imply different preferences toward horizontal and vertical equity adopting the general approach to the measurement of inequality developed by atkinson 1970 we use such a social welfare function to derive measures of inequality that are decomposable into components naturally interpreted as indices of horizontal and vertical equity in particular the former index measures deviations from the fundamental principle that equals be treated equally finally we apply our new measure to two tax return data sets evaluating the degree to which the horizontal equity of the us personal income tax has changed over time and how horizontal equity would be altered by one version of recent proposals to do away with the so called marriage penalty this abstract was borrowed from another version of this item

a simpler theory of optimal capital taxation abstract this paper develops a theory of optimal capital taxation that expresses optimal tax formulas in sufficient statistics we first consider a simple model with utility functions linear in consumption and featuring heterogeneous utility for wealth in this case there are no transitional dynamics the steady state is reached immediately and has finite elasticities of capital with respect to the net of tax rate this allows for a tractable optimal tax analysis with formulas expressed in terms of empirical elasticities and social preferences that can address many important policy questions these formulas can easily be taken to the data to simulate optimal taxes which we do using u s tax return data on labor and capital incomes second we show how these results can be extended to the case with concave utility for consumption the same types of formulas carry over by appropriately defining elasticities we show that one can recover all the results from the simpler model using a new and non standard steady state approach that respects individual preferences even with a fully general utility function

optimal taxation and insurance using machine learning sufficient statistics and beyond abstract how should one use quasi experimental evidence when choosing policies such as tax rates health insurance copay unemployment benefit levels and class sizes in schools this paper suggests an approach based on maximizing posterior expected social welfare combining insights from i optimal policy theory as developed in the field of public finance and ii machine learning using gaussian process priors we provide explicit formulas for posterior expected social welfare and optimal policies in a wide class of policy problems the proposed methods are applied to the choice of coinsurance rates in health insurance using data from the rand health insurance experiment the key trade off in this setting is between transfers toward the sick and insurance costs the key empirical relationship the policy maker needs to learn about is the response of health care expenditures to coinsurance rates holding the economic model and distributive preferences constant we obtain much smaller point estimates of the optimal coinsurance rate 18 vs 50 when applying our estimation method instead of the conventional sufficient statistic approach

on the efficiency of equal sacrifice income tax schedules abstract in an economy which primitives are exactly those in mirrlees 1971 we investigate the efficiency of tax schedules derived under the equal sacrifice principle for a given exogenous government consumption level we assess whether there is an alternative tax schedule that raises more revenue while delivering less utility to no one for our preferred parametrizations we find that inefficiency only arises at the top of the income distribution for marginal tax rates well above the ones we currently observe in most countries we also recover the implicit marginal social weights associated with the equal sacrifice schedule and find them not to be monotonic in types for the environments we study

on the optimal provision of social insurance progressive taxation versus education subsidies in general equilibrium in this paper we compute the optimal tax and education policy transition in an economy where progressive taxes provide social insurance against idiosyncratic wage risk but distort the education decision of households optimally chosen tertiary education subsidies mitigate these distortions we highlight the quantitative importance of general equilibrium feedback effects from policies to relative wages of skilled and unskilled workers subsidizing higher education increases the share of workers with a college degree thereby reducing the college wage premium which has important redistributive benefits we also argue that a full characterization of the transition path is crucial for policy evaluation we find that optimal education policies are always characterized by generous tuition subsidies but the optimal degree of income tax progressivity depends crucially on whether transitional costs of policies are explicitly taken into account and how strongly the college premium responds to policy changes in general equilibrium

the promise of positive optimal taxation normative diversity and a role for equal sacrifice abstract a prominent assumption in modern optimal tax research is that the objective of taxation is utilitarian i present new survey evidence that most people reject this assumption s implications for several prominent features of tax policy instead preferring tax policies based at least in part on a classic alternative objective the principle of equal sacrifice i generalize the standard model to accommodate this preference for a mixed objective proposing a method by which to make disparate criteria commensurable while respecting pareto efficiency then i show that optimal policy in this generalized model calibrated to the survey evidence and u s microdata is capable of quantitatively matching several features of existing tax policy that are incompatible in the conventional model but widely endorsed in the survey and reality including the coexistence of substantial redistribution and limited tagging together these findings demonstrate the potential of a positive theory of optimal taxation

wto accession the changing competitiveness of foreign financed firms and regional development in guangdong of southern china this paper investigates the changing competitiveness of foreign financed manufacturing firms and its implications for regional development in guangdong province of southern china in the run up to world trade organization wto accession it is argued that transnational corporations tncs and some competitive large scale locally funded firms in guangdong will triumph after wto accession the crowding out process of small and medium sized enterprises smes in guangdong will be accelerated in the near future as they are competing directly with tncs and as their competitive advantages are diminishing due to bureaucratic red tape and the rigorous enforcement of new government policies due to close business linkages with local privately funded firms the competitiveness and vitality of foreign financed enterprises will have profound long term effects on the economic development of guangdong before and after wto accession cet article cherche a etudier l evolution de la competitivite des entreprises ind

wages effort and incentive compatibility in life cycle employment contracts existing models of incentive compatibility in life cycle employment contracts arrive at different predictions partly because of the different kinds of contract breaking behavior allowed in them this paper sets out and classifies the full range of such behaviors argues that no model has yet incorporated all of them and examines the consequences of doing so in the context of lazear s well known model in the extended model wages cannot rise faster than marginal products throughout the entire contract and the set of feasible contracts can often be empty even when both parties can commit to terminate the contract whenever it is broken by the other party

economists interest in collective decision after world war ii a history this paper tracks economists rising yet elusive and unstable interest in collective decision mechanism after world war ii we replace their examination of voting procedures and social welfare functions in the 1940s and 1950s in the context of their growing involvement with policy making confronted with natural scientists and mccathythes accusations of ideological bias positive studies emphasizing that collective decisions mechanisms were unstable and inefficient and normative impossibilities economists largely relied on the idea the policy ends they worked with reflected a social consensus as the latter crumbled in the 1960s growing disagreement erupted on how to identify and aggregate those individual values which economists believed should guide applied work in particular in cost benefit analysis the 1970s and 1980s brought new approaches to collective decision arrow s impossibility was solved by expanding the informational basis it was showed that true preferences could be revealed by making decision costly and experimentalists and market designers enabled these mechanisms to be tested in the lab before being sold to those public bodies looking for decision procedures that emulated markets in this new regime the focus paradoxically shifted to coordination revelation and efficiency and those economists studying collective decision processes were marginalized

sympathy for the diligent and the demand for workfare abstract we study the role of fairness concerns in the demand for redistribution through workfare in the first part of the paper we present new evidence from a survey we show that individuals are more generous towards poor people whom they perceive to be diligent workers relative to poor people whom they perceive to be non diligent a social preference that we label sympathy for the diligent this preference is much stronger than preferences regarding other characteristics of the poor such as race nationality and disability more important we show that subjects with higher sympathy for the diligent have a stronger preference for workfare programs in the second part of the paper we incorporate our empirical findings into a model of income redistribution we consider the case of a benevolent government with fairness concerns that prioritizes the well being of individuals who exert the most effort we characterize the optimal conditions under which the government introduces work requirements even if wasteful work requirements can be optimal because they allow for a better distinction between individuals who exert great effort and individuals who do not however if the government lacks commitment power the availability of screening through work requirements leads to a lower equilibrium effort and possibly a pareto dominated allocation

wage contracts when output grows stochastically the roles of mobility costs and capital market imperfections the paper considers an industry in which individual output follows a stochastic growth process with a cumulative effect it analyzes the roles of labor mobility and capital market conditions in the determination of wage contracts positive costs of mobility are shown to be necessary for the provision of wage and employment insurance when workers have no access to the capital market when insurance is provided wages grow less than average productivity if the capital market is perfect wage insurance will be provided even in the absence of costs of mobility in this case wages grow faster than average productivity

social preferences self interest and the demand for redistribution preferences for redistribution may be influenced by values and beliefs about distributive justice as well as by self interest people may prefer more redistribution to the poor if they believe that poverty is caused by circumstances beyond individual control therefore beliefs about the causes of income may affect demand for redistribution alternatively the effect of these beliefs on redistributive preferences may be spurious if they are correlated with income and self interest is not properly controlled for they may also measure incentive cost concerns using social survey data i find that self interest cannot explain the effect of these beliefs on redistributive preferences 2001 elsevier science b v all rights reserved

to what extent do fiscal regimes equalize opportunities for income acquisition among citizens to what extent do fiscal regimes equalize opportunities for income aquisition among citizens journal of public economics

optimal redistribution with endogenous social norms in this paper we examine the effect of social norms on redistributive policies where social norms are reflected in the degree of work participation among the different skill classes participation is driven both by the material incentives and heterogeneous preferences for leisure of each skill class and by an endogenous social norm results for optimal redistributive taxation show that when the social norm enters as a benefit or cost for participants participation taxes are generally lower than in its absence multiple participation equilibria can occur and an engineered shift from a low to a high participation equilibrium can be pareto improving in the long run

redistribution and pollution taxes with non linear engel curves abstract this paper analyses optimal corrective taxation and optimal income redistribution the pigouvian pollution tax is higher if pollution damages disproportionally hurt the poor due to equity weighting of pollution damages moreover under general utility functions optimal pollution taxes should be set below the pigouvian tax if the poor spend a disproportionate fraction of their income on polluting goods however if engel curves are linear optimal pollution taxes should follow the first best rule for the pigouvian corrective tax even if the government wants to redistribute income and the poor spend a disproportional part of their income on polluting goods the often used quasi linear ces and stone geary utility functions all have linear engel curves if engel curves are linear and if pollution taxes are not optimised pareto improving green tax reforms exist that move the pollution tax closer to the pigouvian tax simulations demonstrate that optimal corrective taxes should be pigouvian if the demand for polluting goods is derived from a les demand system but deviate from the pigouvian taxes if demand for polluting goods demand is derived from a piglog demand system

generalized social marginal welfare weights for optimal tax theory this paper proposes to evaluate tax reforms by aggregating money metric losses and gains of different individuals using generalized social marginal welfare weights optimum tax formulas take the same form as standard welfarist tax formulas by simply substitut ing standard marginal social welfare weights with those generalized weights weights directly capture society s concerns for fairness without being necessarily tied to individual utilities suitable weights can help reconcile discrepancies between the welfarist approach and actual tax practice as well as unify in an operational way the most prominent alternatives to utilitarianism such as libertarianism equality of opportunity or poverty alleviation jel d60 d63 h21 h23 i38