On the Edge: Declining Marginal Utility and Tax Policy

The assumption of declining marginal utility of income— that the next dollar a person receives is “worth less”2 to a wealthy person than a poor person—has been crucial in tax scholarship over the last sixty or so years, as optimal tax theory and welfarism have become important ways that many in the legal academy evaluate tax policy.3 In spite of, or perhaps because of, the importance of this assumption, declining marginal utility has received little extended attention from the legal academy.4 This Article begins to fill that gap.