Generalized Social Marginal Welfare Weights for Optimal Tax Theory

Emmanuel Saez, Stefanie Stantcheva

NBER Working Paper No. 18835
Issued in February 2013
NBER Program(s):   PE

This paper proposes a new way to evaluate tax reforms, by aggregating losses and gains of different individuals using "generalized social marginal welfare weights." A tax system is optimal if no budget neutral small reform can increase the weighted sum of (money metric) gains and losses across individuals. Optimum tax formulas take the same form as standard welfarist tax formulas by simply substituting standard marginal social welfare weights with those generalized marginal social welfare weights. Weights directly capture society's concerns for fairness allowing us to cleanly separate individual utilities from social weights. Suitable weights can resolve puzzles of the traditional welfarist approach, as well as unify in an operational way the most prominent alternatives to utilitarianism such as Libertarianism, Rawlsianism, Equality of Opportunity, Poverty alleviation, or Fair Income Taxation. Generalized welfare weights can be specified to, among others, (1) provide a non-confiscatory theory of optimal taxation even absent any behavioral responses, (2) treat differently "deserved income" vs. "undeserved income," (3) distinguish between "deserving transfer beneficiaries" vs. "free loaders," (4) rule out the use of tags unless they create a Pareto improvement. We use a simple online survey to illustrate how to map social preferences of the public into weights.

You may purchase this paper on-line in .pdf format from ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.


This paper was revised on October 21, 2014

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18835

Users who downloaded this paper also downloaded these:
Piketty, Saez, and Stantcheva w17616 Optimal Taxation of Top Labor Incomes: A Tale of Three Elasticities
Kuziemko, Norton, Saez, and Stantcheva w18865 How Elastic Are Preferences for Redistribution? Evidence from Randomized Survey Experiments
Piketty and Saez w18521 Optimal Labor Income Taxation
Mankiw, Weinzierl, and Yagan w15071 Optimal Taxation in Theory and Practice
Knittel and Sandler w18849 The Welfare Impact of Indirect Pigouvian Taxation: Evidence from Transportation
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us