Working Paper: NBER ID: w26683
Authors: Louis Kaplow
Abstract: Specialized theoretical and empirical research should in principle be embedded in a unified framework that identifies the relevant interactions among different phenomena, enables an appropriate matching of policy instruments to objectives, and grounds normative analysis in individuals’ utilities and a social welfare function. This article advances an approach that both provides integration across many dimensions and contexts and also identifies which tasks may be undertaken separately and how such analysis should be conducted so as to be consistent with the underlying framework. It employs the distribution-neutral methodology and welfare analysis developed in Kaplow (2008a) and related work, offering applications to income taxation, commodity taxation, tax expenditures, externalities, public goods, capital income and wealth taxation, social security and retirement savings, estate and gift taxation, and transfer programs. It also explores welfare criteria and examines how their consideration enables the normative analysis of the taxation of families, heterogeneous preferences, and tax administration and enforcement.
Keywords: efficiency; redistribution; public policy; taxation; social welfare
JEL Codes: D61; D62; D63; H20; H21; H23; H24; H26; H41; H43; H53; H55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tax deductions (H20) | charitable giving (D64) |
| income tax adjustments + public good provisions (H49) | efficiency (D61) |
| willingness to pay for public goods > provision cost (H49) | budget surplus (H62) |
| budget surplus (H62) | Pareto improvements (D61) |
| eliminating differential commodity taxes (H29) | efficiency (D61) |
| change in price ratios (F31) | consumption (E21) |
| change in price ratios (F31) | labor supply decisions (J22) |