Retheorizing Progressive Taxation

Abstract

Tax progressivity is undeniably central to both the detailed analytics of tax policy and the rhetorical arguments commonly used in public discourse. Yet there are surprisingly inconsistent and inaccurate uses of this seemingly objective term. By theorizing progressivity’s constitutive elements and identifying its shortcomings, this Article offers a novel taxonomy of how progressivity is assessed and why contradictory assessments are common.

This Article argues that, as a theoretical matter, accurately characterizing tax provisions as progressive (or regressive) requires assessing their burdens beyond simply the tax payments remitted. By failing to account for effects such as economic incidence and inefficiency costs, traditional progressivity analyses are incomplete. Relatedly, since the spending side of the budget process is functionally indistinguishable from taxation, accurate progressivity analyses must also consider where tax revenues are spent.

This Article concludes that inquiring about a tax provision’s progressivity is often to ask the wrong question. Instead, the focus should be on whether the tax provision in question advances whatever normative goals are desired. If progressivity assessments must be used, this Article suggests that earmarked tax assessments—taxes allocated to specific purposes—could improve their accuracy.

Keywords: tax policy

JEL Classification: K34