Efficiency without Apology: Consideration of the Marginal Excess Tax Burden and Distributional Impacts in Benefit–Cost Analysis

Author/Creator ORCID

Date

2020-09-28

Department

Program

Citation of Original Publication

Boardman, A., Greenberg, D., Vining, A., & Weimer, D. (2020). Efficiency without Apology: Consideration of the Marginal Excess Tax Burden and Distributional Impacts in Benefit–Cost Analysis. Journal of Benefit-Cost Analysis, 1-22. doi:10.1017/bca.2020.18

Rights

This item is likely protected under Title 17 of the U.S. Copyright Law. Unless on a Creative Commons license, for uses protected by Copyright Law, contact the copyright holder or the author.
© 2020 Cambridge University Press.

Subjects

Abstract

Some issues in the application of benefit–cost analysis (BCA) remain contentious. Although a strong conceptual case can be made for taking account of the marginal excess tax burden (METB) in conducting BCAs, it is usually excluded. Although a strong conceptual case can be made that BCA should not include distributional values, some analysts continue to advocate doing so. We discuss the cases for inclusion of the METB and the exclusion of distributional weights from what we refer to as “core” BCA, which we argue should be preserved as a protocol for assessing allocative efficiency. These issues are topical because a recent article in this journal recommends ignoring the METB on the grounds that desirable distributional effects offset its cost. We challenge the logic of this article and explain why it may encourage inefficient policies.