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

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  • Boardman, Anthony E.
  • Greenberg, David H.
  • Vining, Aidan R.
  • Weimer, David L.

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.

Suggested Citation

  • Boardman, Anthony E. & Greenberg, David H. & Vining, Aidan R. & Weimer, David L., 2020. "Efficiency without Apology: Consideration of the Marginal Excess Tax Burden and Distributional Impacts in Benefit–Cost Analysis," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 11(3), pages 457-478, October.
    • Handle: RePEc:cup:jbcoan:v:11:y:2020:i:3:p:457-478_6
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    Cited by:

    1. Spackman, Michael, 2021. "Social discounting and the cost of public funding in practice," LSE Research Online Documents on Economics 111490, London School of Economics and Political Science, LSE Library.
    2. Mark A. Moore & Aidan R. Vining, 2023. "PPP performance evaluation: the social welfare goal, principal–agent theory and political economy," Policy Sciences, Springer;Society of Policy Sciences, vol. 56(2), pages 267-299, June.
    3. Spackman, Michael, 2023. "The social discount rate and the cost of public funds: a search for more consistency and better practice," LSE Research Online Documents on Economics 119814, London School of Economics and Political Science, LSE Library.

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