TY  - JOUR
AU  - Kaplow,Louis
TI  - A Note on Taxation as Social Insurance for Uncertain Labor Income
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3708
PY  - 1996
Y2  - March 1996
UR  - http://www.nber.org/papers/w3708
L1  - http://www.nber.org/papers/w3708.pdf
N1  - Author contact info:
Louis Kaplow
Harvard University
Hauser 322
Cambridge, MA  02138
Tel: 617/495-4101
Fax: 617/496-4880
E-Mail: meskridge@law.harvard.edu
AB  - Various authors, notably Eaton and Rosen (1980a) and Varian (1980), have proposed that income taxation may be justified to some extent on the ground that it serves as social insurance against uncertainties in labor income. They assume that private insurance is unavailable. primarily because of moral hazard, and demonstrate that some taxation is efficient because the benefits of mitigating risk exceed incentive costs. This note suggests that private insurance should be considered explicitly in examining this question. Moral hazard problems limiting private insurance coverage are not alleviated by government insurance. Moreover, in the presence of moral hazard, government insurance, through labor income taxation or otherwise, may be an inefficient policy because private insurance decisions are distorted. More traditional justifications for redistributive taxation are unaffected by this argument.
ER  -