An Economists’ View of Equitable Taxation

Abstract

A political philosopher and ail economist apparently approach any given topic in very different ways. The political philosopher wants to start from a very general approach including “human abilities… which are diverse and variable, which wax and wane with incentive structures and modes of human capital formation.” (p. 103) The economist is much more modest. For him progress in economic knowledge is a step by step procedure and he first wants to make clear the basic principles. So before dealing with abilities which wax and wane, one should deal with given abilities to get a feeling for the way in which abilities are relevant for income formation and taxation. Before including all possible effects of progressive taxation, one should carefully deal with different single aspects. Models, which make everything endogenous, have not brought very much progress in economic analysis. Economists have learned that small models are useful to achieve precise results on particular interrelationships, and this information can be used to evaluate more complex phenomena.