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Progressive Taxation: Applying Hayek's Constraint

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Abstract

That progressive taxation might offset a disproportionate burden of indirect taxes upon low income households sits at the heart of a suggestion from Friedrich Hayek. This concerns the manner in which a degree of progression might be accommodated and constrained to preclude arbitrary tax hikes upon minority income groups. While Hayek's proposal is permissive of socialist aims, it looks for efficiency in resource usage as reflected in the aspiration ‘that each should feel that in the aggregate all the collective goods which are applied to him are worth at least as much as the contribution he is required to make’.

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