RATIONAL TAX SCHEME BEHIND A VEIL OF IGNORANCE

A BSTRACT . We explore the design of impartial tax schemes when agents’ incomes are completely determined by their inborn talents. Building on Harsanyi’s veil-of-ignorance approach, we conceptualize an impar-tial observer who chooses a tax scheme without knowing her own vNM utility function, and the distribution of talents, and whose vNM prefer-ences behind the veil obey Harsanyi’s principle of acceptance and are independent of the distribution of talents. Our results in the resulting framework provide three main messages: (i) the veil of ignorance im-plies anonymity of tax schemes; (ii) the veil of ignorance generically rejects utilitarian tax schemes; (iii) the veil of ignorance endorses the (Rawlsian) leveling tax scheme.