1 TAX REFORM EVALUATION USING STATUS QUO BASED WELFARE COMPARISON: AN APPLICATION TO A CONSUMPTION BASED INCOME TAX BY TANJA KIRN

A necessary condition of equitable reforms is the principle of “equal treatment to equals”, which can be tested with the “status quo based social welfare analysis ” (Bourguignon, 2011a). This paper reviews the restrictions of such an approach, by applying it on a consumption tax. The comparative analysis reveals that the “status-quo based ” welfare analysis shows no dominance in terms of social welfare – which is in contrast to the result of the standard utilitarian approach. This finding confirms the importance to flank the standard utilitarian analysis with a “status-quo based” welfare analysis. Additionally is the approach of Bourguignon (2011a) extended towards a dynamic framework, which allows studying long-term welfare effects