J. Mayshar et S. Yitzhaki, DALTON-IMPROVING TAX-REFORM - WHEN HOUSEHOLDS DIFFER IN ABILITY AND NEEDS, Journal of public economics, 62(3), 1996, pp. 399-412
In a previous paper we suggested a method for identifying tax reforms
that adhere to Dalton's principle of transfers, approving a small enou
gh transfer from 'rich' to 'poor'. However, even the weak requirement
from that method, namely prescribing a uni-dimensional ordinal ranking
of households by how deserving they are of a marginal income transfer
, is confining. Here we extend the approach by formulating a two-dimen
sional criterion for a Dalton-improving tax reform, when there is soci
al approval for transfers (when other things are equal) from the more
able to the less able, and from less needy households to more needy on
es. The possibility of applying this extended criterion in practice, a
nd a comparison with other criteria, is carried out using the example
of U.K. excise taxes.