Work

Utilitarianism and Horizontal Equity: The Case for Random Taxation

Year: 1981

Type: report

Abstract: This paper establishes that, far from being able to derive the principle of horizontal equity from utilitarianism, the principle is actually inconsistent with utilitarianism in a variety of circumstances.We derive conditions under which (a) it is optimal to impose random tax schedules (ex post randomization); and (b) it is optimal to randomize the tax schedules imposed on a set of otherwise identical individuals (ex ante randomization).The implications for optimal tax theory are discussed.More generally, it is shown that there are a number of potentially important economic situations with which the principle of horizontal equity may be inconsistent not only with utilitarianism but even with Pareto optimality.

Source: National Bureau of Economic Research

DOI: 10.3386/w0694

Author: Joseph Stiglitz

Institutions: National Bureau of Economic Research, Princeton University, Columbia University

Language: English

Topic: Economic and Fiscal Studies

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Reduced inequalities, Peace, justice, and strong institutions

Open Access status: green

OpenAlex ID: W2109955097

Cites: 18

Cited by: 105

Related to: 10