NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Why do we Redistribute so Much but Tag so Little? The principle of equal sacrifice and optimal taxation

Matthew C. Weinzierl

NBER Working Paper No. 18045
Issued in May 2012
NBER Program(s):   PE

The workhorse model of optimal taxation strongly recommends tagging, but its use in policy is limited. I argue that this puzzle is a symptom of a more fundamental problem. Conventional theory neglects the diverse normative criteria with which, as extensive evidence has shown, most people evaluate policy. In particular, if the classic principle of Equal Sacri...ce augments the standard Utilitarian criterion, optimal tagging is limited. Calibrated simulations of optimal policy with normative diversity of this type simultaneously match three features of U.S. policy: substantial income redistribution; rejection of gender, race, and height tags; and acceptance of a blindness tag. Additional implications increase the appeal of this revision to conventional theory.

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This paper was revised on August 28, 2012

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Document Object Identifier (DOI): 10.3386/w18045

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