Status Quo in the Welfare Analysis of Tax Reforms
Abstract
The welfare analysis of tax reforms most often consists of comparing the post-reform distribution of individual welfare with the pre-reform distribution or possibly that obtained from another reform as if they were completely independent. Such an "anonymous" approach does not take into account "changes" in individual situations, generally the main source of contention in any tax reform debate. This paper proposes a welfare criterion that allows comparison of reforms while taking into account individual status quo--i.e. pre-reform--situations. This is done by extending standard utilitarian social welfare criteria to the case where individual utilities depend on initial income and income change.