Social Philosophy and Policy, Summer 2006
54 Pages Posted: 25 Jan 2006
This Article analogizes the state, in its role as tax collector, to that of an investor, or to be more precise, that of a residual claimant on the earnings of all of the people and firms subject to the taxing power of the state. The relationship between modern democracy and its citizens would be strengthened if this analogy were more widely acknowledged because it recognizes citizen-taxpayers as contracting partners with the state. Unlike other libertarian conceptions of the state's taxing authority, the framework developed here does not jeopardize the state's ability to collect the revenues it needs to provide for the protections of its citizens.
The state-as-investor framework developed in this Article leads to a number of tax policy improvements. The framework suggests limits on the government's ability to change people's tax status after they have already embarked on careers and made the sunken, non-diversifiable investments in human capital that such career training requires. The framework advanced here also suggests that people should be able to make a once-in-a-lifetime payment in lieu of taxes to the state in order to discharge their tax liability. This approach articulated here also seems superior to the utopian suggestion offered by Ayn Rand that taxation be voluntary, as well as to the unrealistic suggestion made by Nozick that income taxes are violative of man's natural rights.
Keywords: Tax Policy, Finance, law and economics
JEL Classification: H20, H30, K2
Suggested Citation: Suggested Citation
Macey, Jonathan R., Government as Contractual Claimant: Tax Policy and the State. Yale Law & Economics Research Paper No. 327; Yale Law School, Public Law Working Paper No. 105; Social Philosophy and Policy, Summer 2006. Available at SSRN: https://ssrn.com/abstract=877505