(27.3)
Inclusion of the progression factor does not cause special observations yet. If
< 1 then in the limit of W the indexation can be rather simple, especially if Pb qr / W goes to zero too. If
> 1, then there could be a point where the markup on W is zero, or subsistence would have to be zero - which would suggest an unrealistic tax function. The progression factor becomes more useful if we regard special cases.
Special cases
Definition: A (democratic) state is “Madisonian”, iff gs = 0. James Madison remarked that a proper democracy with a majority rule actually safeguards the interests of the minorities.
Definition: A “real welfare state” aspires at a constant RIR and takes q = 0. The idea on the latter is that breathing air is prerequisite to utility and no source of it. The berries in the field are owned by someone, and no longer free. (If they were free, then Coase’s Theorem shows that they could be counted as part of income, and hence they would no longer be free for all practical purposes.)
Definition: A “pragmatic” real welfare state sets u = 0 in the determination of the benefit level and RIR. The factor B u really does not amount to much.