Can a ‘veil of ignorance’ reduce the impact of distortionary taxation on public good valuations?

Monetary valuations for mortality and health risk reductions, elicited through stated preference surveys, have been shown to include values placed on others’ welfare. Less attention has been paid to how these altruistic concerns, and hence willingness to pay (WTP), are affected when the public good is to be provided through taxation. We set up a theoretical framework to investigate this issue and show that when we move away from a first-best tax, WTP becomes distorted. However, once a ‘Veil of Ignorance’ is introduced into the model, this distortionary impact is reduced. We test this empirically using a laboratory experiment and confirm our theoretical findings, generating WTP values that are closer to the social optimum.