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Home»Economics»Fairness Gaps for Earnings Tax Design
Economics

Fairness Gaps for Earnings Tax Design

By CharlotteJuly 3, 20261 Min Read
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In a setting with skill and preference heterogeneity, we characterize a family of social welfare measures that aggregate fairness gaps, defined as the difference between the money-metric utilities that individuals have and the money-metric utilities they should have in a fair society. Each welfare measure can be decomposed into government revenues (size), excess burden (inefficiency), and unfair inequality (inequity). As a proof of concept, we evaluate four hypothetical earnings tax reforms based on two normative parameters: the degree of unfairness aversion and the degree of compensation for productive skills.



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