Voting over selfishly optimal tax schedules: Can Pigouvian tax redistribute income?

2020 ◽  
Vol 22 (5) ◽  
pp. 1660-1686
Author(s):  
Darong Dai
Keyword(s):  
Pigouvian Tax ◽  
Optimal Tax ◽  
Redistribute Income

scholarly journals Should the Law Do Anything about Economic Inequality

2018 ◽  
Author(s):  
Matthew Dimick
Keyword(s):  
Tax Policy ◽  
Law And Economics ◽  
Economic Inequality ◽  
Wealth Inequality ◽  
Legal Rule ◽  
Tax System ◽  
Legal Rules ◽  
Optimal Tax Policy ◽  
Optimal Tax ◽  
Redistribute Income

Cornell Journal of Law and Public Policy: Vol. 26 : Iss. 1 , Article 1What should be done about rising income and wealth inequality? Should the design and adoption of legal rules take into account their effects on the distribution of income and wealth? Or should the tax-and transfer system be the exclusive means to address concerns about inequality? A widely-held view argues for the latter: only the tax system, and not the legal system, should be used to redistribute income. While this proposition comes in a variety of normative arguments and has support across the political spectrum, there is also a well-known law-and economics version. This argument, known as the “double-distortion” argument, is simply stated. Legal rules that redistribute income only add to the economic distortions that are already present in the tax system. It would therefore be better for everyone, and especially the poor, to instead adopt an efficient, nonredistributive legal rule, and increase redistribution through the tax system.This Article challenges the double-distortion argument from a law and-economics perspective. There are two main arguments, in addition to several other subsidiary points. First, in the abstract, there is no reason to believe that legal rules that have redistributive effects will always reduce efficiency; indeed, they can sometimes increase efficiency. Examples from the regulation of product markets, labor markets, and financial markets underscore this claim. In these cases, legal redistribution is more efficient than redistribution through the tax system. Second, legal rules are likely to be more attractive than taxation precisely in cases where inequality itself or normative concern about inequality is high. Under the optimal tax policy, higher inequality or greater concern about inequality will justify larger tax distortions. Therefore, a particular legal rule is more likely to be more efficient than the optimal tax policy under these circumstances. The ultimate conclusion is that a mix of legal rules and taxation, rather than taxation exclusively, will be the best way to address economic inequality.

WHAT IS AN "OPTIMAL" TAX SYSTEM?

1996 ◽  
Vol 49 (1) ◽  
pp. 117-133 ◽  
Author(s):  
JAMES ALM
Keyword(s):  
Tax System ◽  
Optimal Tax

HOUSING DEPRECIATION AND OPTIMAL TAX POLICY

1979 ◽  
Vol 32 (4) ◽  
pp. 471-479
Author(s):  
CHESTER C. McGUIRE
Keyword(s):  
Tax Policy ◽  
Optimal Tax Policy ◽  
Optimal Tax

scholarly journals Interventions with Sticky Social Norms: A Critique

2021 ◽  
Author(s):  
Rohan Dutta ◽  
David K Levine ◽  
Salvatore Modica
Keyword(s):  
Social Norms ◽  
Public Goods ◽  
Case Studies ◽  
General Model ◽  
Negative Externality ◽  
Pigouvian Tax ◽  
Policy Interventions ◽  
The Cost ◽  
Unexpected Consequences

Abstract We study the consequences of policy interventions when social norms are endogenous but costly to change. In our environment a group faces a negative externality that it partially mitigates through incentives in the form of punishments. In this setting policy interventions can have unexpected consequences. The most striking is that when the cost of bargaining is high introducing a Pigouvian tax can increase output - yet in doing so increase welfare. An observer who saw that an increase in a Pigouvian tax raised output might wrongly conclude that this harmed welfare and that a larger tax increase would also raise output. This counter-intuitive impact on output is demonstrated theoretically for a general model and found in case studies for public goods subsidies and cartels.

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