Get access

STATUS QUO IN THE WELFARE ANALYSIS OF TAX REFORMS

Authors


  • Note: This paper is based on the Ruggles lecture given at the IARIW 2010 congress in St Gallen. I thank participants to the conference for their helpful comments and especially Stephan Klasen for his rereading of the next to final version of this paper.

François Bourguignon, Paris School of Economics, 48 Bd Jourdan, 75014 Paris, France (francois.bourguignon@parisschoolofeconomics.eu).

Abstract

The welfare analysis of tax reforms most often consists of comparing the post-reform distribution of individual welfare with the pre-reform distribution or possibly that obtained from another reform as if they were completely independent. Such an “anonymous” approach does not take into account “changes” in individual situations, generally the main source of contention in any tax reform debate. This paper proposes a welfare criterion that allows comparison of reforms while taking into account individual status quo—i.e. pre-reform—situations. This is done by extending standard utilitarian social welfare criteria to the case where individual utilities depend on initial income and income change.

Ancillary