Do Benefit and Equal Absolute Sacrifice Rules Really Lead To Different Taxation Levels?

Abstract

The benefit and ability to pay principles of public finance are generally presented as two different concepts of fiscal equity. Redistributive taxes are generally based on the ability to pay principle. The authors show that in the case of pure public goods, under specific conditions, the benefit and the equal absolute sacrifice rules lead to very similar taxation levels. Therefore the choice of taxation rules is of secondary importance. By contrast, the value of the elasticity of marginal income utility plays a primary role.