Distribution-neutral provision of public goods (Q2460078)

This article presents a model for the financing of a public good by means of an income tax in such a way that the distribution of the net benefits is neutral. The first section begins with an overview of the terminology and a presentation of the background assumptions and preference models of the consumers. This is followed in Section 2 with an overview of the proposed model including the type of utility function used, the taxation model, the definition of the net benefits and the implied marginal willingness to pay. Section 3 focuses on distributional neutrality. The authors assume that the government has a view on the quantity of the public good, the preference ordering and the income distribution. The objective of the model is for the government to decide on a income tax schedule that is distribution-neutral. Several propositions and corollaries are presented with proof and the existence and uniqueness of an appropriate tax function is established. In the fourth section the authors present three useful examples where the constant marginal willingness to pay \(\varepsilon\) takes different values and the paper concludes with a summary discussion of the model and a list of relevant references.