How does marginal utility of taxation affect the distribution of tax burdens?

The marginal utility of taxation refers to the change in utility or satisfaction that individuals experience as a result of paying an additional unit of tax. The impact of marginal utility of taxation on the distribution of tax burdens is that it tends to affect individuals differently based on their income levels.

Generally, individuals with higher incomes tend to have a lower marginal utility of taxation. This means that as they pay additional taxes, the decrease in their overall satisfaction or utility is relatively smaller compared to individuals with lower incomes. As a result, higher-income individuals may be able to bear a larger tax burden without experiencing a significant decrease in their overall well-being.

On the other hand, individuals with lower incomes tend to have a higher marginal utility of taxation. This means that as they pay additional taxes, the decrease in their overall satisfaction or utility is relatively larger compared to higher-income individuals. As a result, lower-income individuals may struggle more to bear the same tax burden without experiencing a significant decrease in their overall well-being.

Therefore, the marginal utility of taxation affects the distribution of tax burdens by placing a relatively heavier burden on individuals with lower incomes compared to those with higher incomes. This can lead to a less equitable distribution of tax burdens and potentially exacerbate income inequality.