A Persian Cafe, Edward Lord Weeks

Thursday, 19 December 2013

A taxation policy proposal

The higher your income, the more the state taxes - not just in absolute terms, but as a proportion of your income. This is generally agreed to be because richer people have a lower marginal utility of wealth: an extra £1000 a year is worth less to you if you're already earning £50,000 per annum than an extra £100 a year if you're earning £5,000 per annum.

But income isn't the only thing which affects the utility you gain or lose from changes in your income. For example, if you are on the political left then you are likely to view your tax payments as an excellent chance to help those worse off than yourself; if you are a libertarian, you are more likely to regard them as tantamount to theft. All else being equal, a libertarian will lose more utility from being taxed than a leftie taxed the same amount. It follows that libertarians (and perhaps to a lesser extent right-wingers) ought to receive tax breaks.

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