Journal of Economic Literature
ISSN 0022-0515 (Print) | ISSN 2328-8175 (Online)
Optimal Income Taxation Theory and Principles of Fairness
Journal of Economic Literature
vol. 56,
no. 3, September 2018
(pp. 1029–79)
Abstract
The achievements and limitations of the classical theory of optimal labor-income taxation based on social welfare functions are now well known. Even though utilitarianism still dominates public economics, recent interest has arisen for broadening the normative approach and making room for fairness principles such as desert or responsibility. Fairness principles sometimes provide immediate recommendations about the relative weights to assign to various income ranges, but in general require a careful choice of utility representations embodying the relevant interpersonal comparisons. The main message of this paper is that the traditional tool of welfare economics, the social welfare function framework, is flexible enough to incorporate many approaches, from egalitarianism to libertarianism.Citation
Fleurbaey, Marc, and François Maniquet. 2018. "Optimal Income Taxation Theory and Principles of Fairness." Journal of Economic Literature, 56 (3): 1029–79. DOI: 10.1257/jel.20171238Additional Materials
JEL Classification
- D63 Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- H21 Taxation and Subsidies: Efficiency; Optimal Taxation
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity