General Seminar Series no.12 - Itai Sher - 23 May 2024

Generalized social marginal welfare weights imply inconsistent comparisons of tax policies 

Abstract: This paper concerns Saez and Stantcheva’s (2016) generalized social marginal welfare weights (GSMWW), 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.