July 2018
Article
Economic Journal

Revisiting the Classical View of Benefit-Based Taxation

Format:Print

Abstract

This article incorporates into modern optimal tax theory the classical logic of benefit‐based taxation in which an individual's benefit from the activities of the state is tied to his or her income‐earning ability. First‐best optimal policy is characterized analytically as depending on a few potentially estimable statistics. Constrained optimal policy, with a Pareto‐efficient objective that trades off this principle and conventional utilitarianism, is 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. This analysis thereby contributes to the theory of positive optimal taxation.

Keywords

Taxation; Theory; Policy

Citation

Weinzierl, Matthew. "Revisiting the Classical View of Benefit-Based Taxation." Economic Journal 128, no. 612 (July 2018): F37–F64. (Also Harvard Business School Working Paper, No. 14-101, April 2014.)