Understanding Different Approaches to Benefit-Based Taxation

Robert   Scherf; Matthew C. Weinzierl

Working Paper | HBS Working Paper Series | 2019

Understanding Different Approaches to Benefit-Based Taxation

by Robert Scherf and Matthew C. Weinzierl

Abstract

The normative principle of benefit-based taxation has exerted substantial influence on many areas of public finance, but it has been largely set aside in the modern theoretical approach to optimal income taxation, where welfarist objectives dominate. A prerequisite for that gap to close is the clarification of what benefit-based income taxation would mean, specifically in a first-best setting. This paper seeks to provide clear, accessible descriptions and novel graphical representations of four major approaches to first-best benefit-based taxation; explain how these approaches relate to each other; and apply them within the Classical Benefit-Based framework for optimal income taxation of Smith (1776).

Keywords: benefit-based taxation; Taxation; Theory;

Language: English

Format: Print

19 pages

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Citation:

Scherf, Robert, and Matthew C. Weinzierl. "Understanding Different Approaches to Benefit-Based Taxation." Harvard Business School Working Paper, No. 19-070, January 2019. (Revised March 2019.)

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Understanding Different Approaches to Benefit-Based Taxation

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