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

Published online by Cambridge University Press:  28 September 2020

Anthony E. Boardman ,
David H. Greenberg ,
Aidan R. Vining  and
David L. Weimer
Anthony E. Boardman
Affiliation:
University of British Columbia, Vancouver, BC, Canada
David H. Greenberg*
Affiliation:
University of Maryland, Baltimore County, MD, USA, e-mail: dhgreenb@umbc.edu
Aidan R. Vining
Affiliation:
Simon Fraser University, Vancouver, BC, Canada
David L. Weimer
Affiliation:
University of Wisconsin-Madison, Madison, WI, USA
*
*e-mail: dhgreenb@umbc.edu
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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.

Keywords

benefit-cost analysismarginal excess tax burdendistributional weightsdistributional effectsmulti-goal analysissocial welfare function
Type
Article
Information
Journal of Benefit-Cost Analysis , Volume 11 , Issue 3 , Fall 2020 , pp. 457 - 478
Copyright
© The Author(s) 2020. Published by Cambridge University Press on behalf of the Society for Benefit-Cost Analysis

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