The Normative Underpinnings of Taxation
Nevada Law Journal, 2012/BEYOND ECONOMIC EFFICIENCY IN U.S. TAX LAW, Aspen Publishing, 2013
41 Pages Posted: 3 Aug 2006 Last revised: 16 Sep 2013
Date Written: 2012
Questions about the appropriate rules and mechanisms of taxation are, first and foremost, questions concerning the nature of society. What can be taxed, what cannot, for what purpose, when, and how, are all matters that go to the heart of society and, in particular, concern society’s underlying beliefs and values vis-à-vis the meaning and attainment of justice. This chapter explores the role of normative values and theory in tax policymaking. It suggests that a candid elaboration of normative perspectives, and how they shed light on taxation, could lead to a better understanding of society as well as a better tax system. To this end, the chapter promotes a return to fundamentals and explores three political theories relevant to the formation of the current tax discourse: the theory of natural entitlement, utilitarianism, and Rawls's theory of justice as fairness. It fleshes out the perspectives of these theories on fiscal policy, particularly, with regard to one question: what can taxpayers expect to receive in fair return for their expended labor and capital. It opines that, under all three political theories, taxpayers can generally expect to only receive a net return on labor and capital – i.e., gross return on their investments less the sum needed for maintenance of the existing societal order. In an unjust, or suboptimal, societal order (however this measure is conceived), further taxation can be expected to correct this condition. Importantly, this additional taxation becomes a plausible scenario under each of the three theories explored, supporting some form of redistributive mechanism.
Keywords: Taxation, Tax Policy, Tax Theory, Tax Justice, Redistribution, Normative Analysis
JEL Classification: A13, A19, B00, B49, D00, D31, D39, D61, D79, H00, H20, H21, H23, H29, H59, I31, I39, K34
Suggested Citation: Suggested Citation