Generalized Social Marginal Welfare Weights Imply Inconsistent Comparisons of Tax Policies

Sher, Itai

doi:10.1257/aer.20211025

Abstract

This paper concerns Saez and Stantcheva’s (2016) generalized social marginal welfare weights, which aggregate losses and gains due to tax policies while incorporating non-utilitarian ethical considerations. The approach evaluates local tax changes without a global social objective. I show that local tax policy comparisons implicitly entail global comparisons. Moreover, whenever welfare weights do not have a utilitarian structure, these implied global comparisons are inconsistent. I argue that broader ethical values cannot in general be represented simply by modifying the weights placed on benefits to different people, and a more thoroughgoing modification of the utilitarian approach is required.

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Generalized Social Marginal Welfare Weights Imply Inconsistent Comparisons of Tax Policies

Abstract

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