Introduction
In 1953, Walter J. Blum and Harry Kalven Jr. published The Uneasy Case for Progressive Taxation, a short but influential essay on the politics and theory of vertical equity. Their work contributed to a vigorous debate over federal taxation that had been growing in the wake of World War II. A new Republican president was making the case for broad tax cuts, and a proposal to constitutionally cap income tax rates at 25 percent had attracted considerable support among both voters and elected officials.
Despite the clamor for tax cuts, a broad though somewhat vague political consensus supported progressivity. As Blum and Kalven acknowledged, "Progressive taxation is now regarded as one of the central ideas of modern democratic capitalism and is widely accepted as a secure policy commitment which does not require serious examination." They attributed this security to the idea's intrinsic—albeit nebulous—appeal: "Like most people today," they confessed, "we found the notion of progression immediately congenial" (2).
Blum and Kalven, however, were bent upon exploring the theoretical case for progressive taxation. After a rigorous examination, they acknowledged its weakness: "It is hard to gain much comfort," they concluded, "from the special arguments, however intricate their formulations, constructed on notions of benefit, sacrifice, ability to pay, or economic stability" (102). Ultimately, they suggested, the "stubborn but uneasy" case for progressivity hinged on notions of equality and distributive justice.
Fifty Years Later
Blum and Kalven's essay breathed new life into debates over tax justice and quickly became a classic among scholars. As they pointed out, however, such debates are difficult to sustain; discussing equality raises unsettling questions about the nature of American society, inhibiting frank discussion. "The lingering fear," they suggested, "must always have been that any case for progression on these grounds proves too much" (85).
In the 50 years since the publication of Uneasy Case, Blum and Kalven have been proven right: The debate over tax fairness—at least among many tax experts—has often drifted from frank discussion of distributive justice toward the less "unsettling" ideas associated with horizontal equity—which holds that taxpayers with equal income should pay equal taxes. While questions of inequality have engaged the scholarly community as a whole—especially political scientists and legal scholars—tax experts have generally shied away from using the revenue system to address these concerns. Still, tax justice has remained a pillar of the political (if not the professional) tax debate. Progressivity retains its pride of place in popular discussions of tax reform; even proponents of the flat tax—a proposal rooted firmly in concern for horizontal equity—feel compelled to trumpet the progressivity of their ideas. Indeed, current debates over tax reduction and tax system replacement raise new questions about the meaning of tax justice and its relationship to progressivity.
The political importance of issues related to tax justice suggests the need to revisit this concept. This volume brings together perspectives on tax justice from nine leading experts. The contributions include historical evaluations of the U.S. tax system, theoretical explorations of distributive justice, and analyses of tax justice issues in contemporary policy debates. Together, they offer fresh insight into this politically potent subject.
The Musgrave "Equal-Worth" Metric
The book begins with a chapter by Richard A. Musgrave—perhaps the most influential voice in tax justice debates over the last 40 years. Musgrave first provides an overview of the two principal approaches to tax justice: benefit taxation and ability to pay. While acknowledging the contributions of both, he finds fault with each. The former, he suggests, sidesteps important issues of distributive justice, while the latter necessarily relies on problematic measurements of individual utility. Musgrave concludes that arguments for progressive taxation must find their roots in an ethical premise of equal worth. Drawing on the work of philosopher John Rawls, he argues that "there remains a presumption for progressive taxation, a case not based on a dubious behavioral assumption, but on what might be called good manners in a democratic society."
With this premise in mind, Musgrave moves on to assess several recent tax reform proposals, including the so-called flat tax and the unlimited savings allowance (USA) tax. He acknowledges the attractiveness of moving to a consumption base for the federal tax system, but suggests "it may well be the better part of wisdom to stay with the income base and push for improvement, rather than undertake a massive and untested conversion to consumption."
Three Historical Perspectives
Building on Musgrave's outline of the contemporary tax debate, chapters 2, 3, and 4 offer historical perspectives on the topic. Dennis J. Ventry Jr. begins with an overview of tax justice in the American political tradition, focusing on tax policy and politics since World War II. This period, Ventry maintains, witnessed the decline of vertical equity as a serious topic of study among tax experts, especially economists. Beginning in the 1950s, and accelerating in the 1970s, economists turned their attention away from vertical equity and toward efficiency and economic growth. To the extent that economists considered questions of tax equity, they examined how deviations from horizontal equity influenced efficiency and growth, rather than how degrees of vertical equity affected prevailing norms of social and economic justice. Ventry argues that this abandonment of progressive tax equity has left tax experts out of step with the American public—a public that continues to demonstrate a keen sensitivity to questions of fairness, justice, and progressivity. While taxpayers have endorsed reductions in marginal income tax rates, he warns, they have not demanded the elimination of progressive taxation.
In the second historical chapter, W. Elliot Brownlee examines the taxation of wealthy Americans. His chapter offers an assessment of current research on the historical effects of progressive taxation, including the impact of progressive tax structures on distributions of income and wealth, economic growth, and economic stability. A definitive history of tax justice in the United States, he asserts, must explore the effects of tax policy, not just its intentions. Historians, he maintains, must unravel the dynamic relationship between the development of tax policy and the economic context of such a development, a context that may be partially shaped by tax policies.
Brownlee considers how an improved understanding of the economic context of tax policy would help explain why policymakers have used various methods to advance the cause of tax justice. Specifically, Brownlee underscores the need for research on the linkages between institutional development and economic performance. A better sense of institutional history and of social learning, he argues, would help explain economic development, especially the emergence and spread of incentive systems that have promoted technological advance and investments in human capital.
Carolyn C. Jones offers a third historical perspective, providing a case study of conflicts over social justice within the Federal Council of Churches and its successor, the National Council of Churches (NCC). In the years after World War II, she notes, federated Protestantism provided a battleground for opposing visions of tax justice and Christianity. Commentators offered conflicting ideas about social justice, pitching collectivism against individualism and framing them in terms consistent with the geopolitical struggle of the Cold War. Both liberal Protestants and conservative forces seeking to influence the NCC took similar approaches to tax equity, viewing the topic as a component of more fundamental debates over the nation's economic system. While certain specific issues attracted attention—the inadequacy of depreciation allowances, the tax treatment of business losses, and the double taxation of corporate earnings—debates generally focused on larger issues of economic justice.
Jones finds that debates over tax justice among Protestant clergy and lay leaders tended to follow one of two lines. The first, which she calls the educative prototype, sought to promote economic knowledge among the clergy. Because of their perceived influence, clergy members found themselves the target of both conservative and liberal activists. As the government took a more active role in the economy, partly because of the continuation of the World War II tax regime, discussions of economics became more contentious and central to federated Protestantism.
A second, more overtly religious prototype centered on fundamental questions of the role of government and the nature of man. Libertarian and conservative Protestants supported an individualized approach to faith and salvation, assigning government only a minimal role. They cast redistributive taxation as misguided and fundamentally un-Christian, smacking of communism. For leading liberals, however, taxation was a means of coercing sinful and selfish people into doing what they knew was right. They built a case for redistributive taxation on theological arguments about justice, love, and the innate selfishness of men.
In all three of this book's historical chapters, questions of distributive justice loom large. Indeed, issues of inequality and what the government should do about it have animated political debates in almost every period of American history. Understanding distributive justice, however, is no small task; the topic has long been the focus of spirited debate among philosophers, political scientists, and legal scholars. Most of this debate touches on taxation only indirectly. This book, however, includes two contributions that seek to explore questions of distributive justice in the context of U.S. federal taxation.
Endowment As an Underlying Measure
In chapter 5, Daniel Shaviro scrutinizes the way we measure inequality—an important issue in tax justice debates that hinge on distributive justice. He suggests that traditional measures of inequality, including income, consumption, and wealth, fall short of being ideal yardsticks. Such measures, he contends, can only be justified as imperfect proxies for some underlying metric of inequality. In their place, Shaviro suggests the concept of endowment, also called "ability," "faculty," and "wage rate." He explores the relevance of endowment to distribution policy under welfarist and liberal egalitarian approaches to distributive justice.
Shaviro's chapter applies the theoretical to the practical, exploring how the concept of endowment can play a larger role in tax policymaking. "Discussions of endowment may seem far from the real-world choices we face in our tax system," he admits. But "a better understanding of one's underlying aims might encourage clearer thinking about the choices we face." His work suggests, for example, that debates about replacing the income tax with a consumption tax should focus more on how the competing tax bases might influence efficiency and distribution, and less on the ideological or philosophical arguments behind either tax base. Shaviro's analysis challenges theorists and policymakers to examine how we tax before we decide what to tax.
Demystifying the Flat Tax
Noting the widespread political support for a flat-rate tax system, Barbara Fried explores the fairness of proportional taxation. Rate structures themselves, she points out, are not the proper focus of fairness debates, because they are simply the policy incarnation of other prior moral commitments about the appropriate role of government. Consequently, Fried considers the case for proportionate taxation in the context of two prominent views of governmental power: libertarianism and social welfarism. She concludes that neither approach offers a sustainable rationale for proportionate taxation.
Fried goes on to debunk several arguments for proportionate taxation that do not, at least in theory, envision a larger role for government, including the idea that a flat-rate tax system strikes a victory for equality, minimizes distortions to individuals' choices among various activities, or curbs the expropriation of wealth by the political majority. Fried finds none of these arguments convincing, concluding that the popularity of proportionate tax schemes largely reflects their apparently simple mathematical premises as well as the political expediency they offer libertarians, who would be even more comfortable with a regressive rate system.
State and Local Debates
Reassessing the meaning and importance of tax justice requires attention to all levels of government. While federal issues dominate the national headlines, state and local taxes are the focus of at least as much voter interest. In fact, state-level antitax movements, a powerful political force for almost 30 years, have helped to engineer a realignment in American politics. To shed light on these movements, in chapter 7 David Brunori evaluates tax justice in the U.S. states. Brunori delivers a stern indictment of state revenue systems, charging them with unnecessary regressivity. Conventional views among tax professionals, he argues, would have us believe that progressive tax systems are impossible on the state level, in large part because businesses and households are thought to be highly mobile. High taxes, state legislators fear, will promote an outflow of people, business, and money to other locales with lower tax burdens. In addition, Brunori says, potent political opposition to any sort of tax increase makes it difficult in many states to restructure revenue systems. The spread of direct democracy efforts (including initiatives and referenda) also tend to thwart efforts to shift tax burdens toward businesses or wealthy individuals.
While acknowledging the economic and political obstacles to more progressive state tax systems, Brunori rejects the idea that regressive taxes are inevitable. He urges legislators to remain skeptical about claims of capital and household mobility. Furthermore, he encourages them to avoid the use of targeted business tax incentives that worsen already unjust tax systems. In his view, many of the arguments used to justify targeted tax breaks rest on flimsy evidence. Rather, they further erode the progressive qualities of state tax systems.
Joan M. Youngman offers a view of tax justice from the local perspective, analyzing the role of property taxes in local finance. She takes an objective view of this traditionally contentious tax—the cause of numerous tax revolts since its inception, particularly during the last 30 years. Her contribution distinguishes between questions of fairness about the structure and administration of the tax and questions that relate specifically to property rights. Property tax professionals, she notes, can bolster the fairness of the tax by improving the related valuation, collection, and enforcement processes.
Putting administration issues aside, Youngman emphasizes that the property tax's very essence—its continuing public claim on privately owned real property—accounts for both its enduring strengths and its enduring unpopularity. The levy's visibility, she contends, is valuable, promoting accountability in government. In addition, its independence from other tax systems (both federal and state) makes it a solid, dependable foundation for local finance. Youngman urges tax experts and policymakers not to lose sight of these merits in the debate over administration issues.
Justice by Analysis Not Aesthetics
The book concludes with a chapter by C. Eugene Steuerle, one of Washington's most prominent tax experts and the veteran of many years in the federal tax policymaking process. Steuerle makes a strong case for the importance of equity concerns in the crafting of workable tax policy. He begins with an outline of key issues, such as the definition of tax justice, its relationship to other goals (including economic efficiency), and the inherent tension between individual freedom and progressive tax structures. Steuerle acknowledges the numerous complexities involved in translating theory into practice, but he highlights ways that rigorous analysis can effectively identify workable approaches.
Steuerle notes that determining the appropriate degree of progressivity has always been a sticking point for policymakers charged with designing a tax system. Many economists faced with the same problem have thrown up their hands, relegating the answer to the realm of aesthetics, not analytical thought. Steuerle rejects this view, contending that economists in particular have an important contribution to make. Economists, he says, should reclaim "the equity ground on which policymakers instinctively move, and on which economists from Adam Smith to Richard Musgrave quite naturally walked."
Taken together, these chapters are intended to raise new questions—and to unearth old ones. Tax justice has too often been relegated to the sidelines by tax experts, especially those charged with crafting government policy. When contemplating the harsh reality of a budget deficit or the happier possibility of a budget surplus, questions of justice and equity should remain central to the public debate.
REFERENCE
Blum, Walter, and Harry Kalven Jr. 1953. The Uneasy Case for Progressive Taxation. Chicago: University of Chicago Press.
