A comparison of optimal tax policies when compensation or responsibility matter

This paper examines optimal redistribution in a model with high- and low-skilled individuals with heterogeneous tastes for labor. We compare the extent to which optimal policies based on different normative criteria obey the principles of compensation (for differential skills) and responsibility (for preferences for labor) when labor supply is along the extensive margin. With heterogeneity in skills and preferences, traditional Welfarist criteria including Utilitarianism present unappealing policy recommendations in some scenarios as they fail to take compensation and responsibility issues into account. Criteria from the social-choice literature perform better in this regard in first and second best. More importantly, these equality of opportunity criteria push the second best policy away from an Earned Income Tax Credit and in the direction of a Negative Income Tax.

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Document type	Article de périodique (Journal article) – Article de recherche
Access type	Accès interdit
Publication date	2011
Language	Anglais
Journal information	"Journal of Public Economics" - Vol. 95, no. 11-12, p. 1248-1262 (2011)
Peer reviewed	yes
Publisher	Elsevier BV * North-Holland ((Netherlands) Amsterdam)
issn	0047-2727
Publication status	Publié
Affiliations	UCL - SSH/LIDAM/CORE - Center for operations research and econometrics Norwegian School of Economics and Business Administration - Economics Department
Keywords	Optimal income taxation ; Equality of opportunity ; Heterogeneous preferences for labor
Links	http://hdl.handle.net/2078.1/112896[Handle] https://doi.org/10.1016/j.jpubeco.2010.05.005[DOI]

See also
	[boreal:28523]	A comparison of optimal tax policies when compensation or responsibility matter