Dalton-Improving Indirect Tax Reform
American Economic Review
1995
A tax reform is 'Dalton-improving' if it improves social welfare for all possible social-welfare functions that conform to Hugh Dalton's principle of transfers. According to this principle, there exists a prior social ranking of households and a transfer is approved if it it distributes from high-ranking ('rich') to low-ranking ('poor') households, without altering the ranking itself. In this paper, the authors develop a procedure for identifying marginal Dalton-improving reforms in the context of indirect taxation. The methodology is illustrated using data on excise taxes in the United Kingdom. Copyright 1995 by American Economic Association.
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