The Equal-Sacrifice Social Welfare Function with an Application to Optimal Income Taxation
CESifo, Munich, 2020
CESifo Working Paper No. 8505
We propose and axiomatically characterize a family of welfare criteria that prioritize individuals making larger sacrifices. By combining efficiency with a concern for equality of sacrifice, our criteria avoid serious shortcomings of utilitarianism. We illustrate our results within the Mirrleesian optimal taxation framework. Our simulated equal-sacrifice optimal tax schedule for the US has marginal tax rates in line with the US tax system and about 20 percentage points lower than the utilitarian recommendation.
Public Finance
Public Choice