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- Title
Democracy and Opportunity: A New Paradigm in Tax Equity.
- Authors
Repetti, James R.
- Abstract
This Article suggests that the principal equity goal underlying a just government is the creation of equal opportunities for all citizens to achieve self-realization. Therefore, it proposes that a tax should be designed to achieve equal opportunity for self-realization as one of its principal goals. Viewing equal opportunity for self-realization as a design issue leads to the identification of another principle that is foundational: the promotion of democracy. Both political philosophy and empirical literature suggest that equal access to the electoral process and participation in the community must exist in order for equal opportunity for self-realization to exist. Designing a tax system to help achieve these goals will not only increase equity, but also may provide efficiency gains that analysts have ignored. To illustrate the importance of designing a tax system based on these equity principles, this Article revisits the debate about the desirability of an income tax versus a consumption tax. It argues that a progressive income tax that limits loss deductions is better than an ideal consumption tax in establishing the conditions for equal opportunity for self-realization and democracy. A progressive income tax that limits loss deductions burdens investment income, which is a major source of political power. In contrast, a consumption tax cannot burden the disproportionate political power of the wealthy because it only burdens investment income in narrow situations, and wealthy individuals only consume a small percentage of their total income. This Article also analyzes other efficiency and equity claims for the two forms of taxes. The efficiency claims for an ideal consumption tax versus our existing income tax are overstated when viewed in the context of real world systems that account for taxpayer behavior and transition relief. Given the uncertain efficiency gains of a consumption tax in the real world, there is a strong argument that the equity goals discussed herein should govern the selection of a tax system. Such equity goals favor a progressive income tax that burdens investment income.
- Subjects
EQUITY (Law); SELF-realization; EQUALITY; TAXATION; DEMOCRACY; POLITICAL philosophy; CAPITAL gains; POWER (Social sciences); INVESTMENT income
- Publication
Vanderbilt Law Review, 2008, Vol 61, Issue 4, p1129
- ISSN
0042-2533
- Publication type
Article