Taxation Behind The Veil of Ignorance

Professor at Department of Economics, Director at Center for Distributive Justice, Seoul National University. Editor of Journal of Institutional and Theoretical Economics. He earned his PhD. of Economics from University of Rochester. His research interest includes Economic Theory, Microeconomics, Public Finance, Political Economy, Mechanism Design. 

We explore the design of impartial tax schemes when agents’ incomes are completely determined by their inborn talents. Building on Harsanyi’s veil-of-ignorance approach, we conceptualize an impar-tial observer who chooses a tax scheme without knowing her own vNM utility function, and the distribution of talents, and whose vNM prefer-ences behind the veil obey Harsanyi’s principle of acceptance and are independent of the distribution of talents. Our results in the resulting framework provide three main messages: (i) the veil of ignorance im-plies anonymity of tax schemes; (ii) the veil of ignorance generically rejects utilitarian tax schemes; (iii) the veil of ignorance endorses the (Rawlsian) leveling tax scheme.