The Italian Tradition in Fiscal Theory: Taxation and Efficiency

The paper examines how the theme of ‘efficiency’ evolved over time (1882-1956) in the Italian tradition of fiscal theory, that keeps pace with the history of modern unitary State, and in the construction of the method of theoretical analysis of fiscal problems. On reading the works of some outstanding forerunners in the eighteenth and nineteenth centuries we can see how schemes of efficient tax design were originated, when theories of tax shifting began to come out, together with a value theory based on utility and hints of utilitarian welfare economics. The diffusion of marginalism as a modern logical basis for economics readily matches with liberal political philosophy, leading to radicalism. In Italy with the introduction of marginalism the issues of efficiency in taxation are discussed and clarified. Efficiency as minimization of deadweight loss, as neutrality or uniformity and as a principle linked to equity appears in Italian economists like Pantaleoni, Barone, Einaudi, De Viti de Marco, Gobbi, Conigliani et al., in discussions on direct and indirect taxation, on expenditure tax, on taxation and work effort, and on progressive income taxation. Debates about efficient taxation were developed with a general equilibrium methodology, keeping into account the effects and productivity of tax revenue. The role of tax shifting in the analysis was also considered. In the Italian tradition the idea that it is impossible to know the final effects of taxes and therefore it is impossible to draw a rational tax design often led to agnostic conclusions. Many considerations about efficiency rely on the general principle that, given the impossibility of correct choices by consumers-producers-taxpayers, forced choices and coercion are necessary public corrective measures.