This study offers a theoretical discussion of equity and efficiency aspects of income taxation. The analysis is carried out on two levels. The first one concerns the axiomatic derivation of certain tax principles in the framework of social choice theory. Normative characterizations of the two most familiar principles of the social-welfare-functional approach, namely the utilitarian objective and maximin, are contrasted with characterizations of the principle of equal proportional sacrifice (which may be regarded as the most widely accepted version of the ability-to-pay principle) and of the (formal-democratic) rule of majority voting. As a special case, the outcome of majority voting when individuals have non-egoistic preferences is discussed. On the second level, two specific models are introduced in order to analyze, by methods of optimal-taxation theory, the implications of the tax principles for the distribution of income (or taxes, resp.). Fixed individual incomes are assumed in the first model, while the second one incorporates a free individual labour-leisure choice. Within these models, the distributive consequences of the respective principles are investigated systematically, comparing the results for an optimum lump-sum tax with the more realistic case of linear and nonlinear income taxes.
