Searching for a Just Tax System

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TPC Discussion Paper No. 13

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The Urban-Brookings Tax Policy Center

The Tax Policy Center (TPC) aims to clarify and analyze the nation's tax policy choices by providing timely and accessible facts, analyses, and commentary to policymakers, journalists, citizens and researchers. TPC's nationally recognized experts in tax, budget and social policy carry out an integrated program of research and communication on four overarching issues: fair, simple and efficient taxation; long-term implications of tax policy choices; social policy in the tax code; and state tax issues.

Support for the Center comes from a generous consortium of funders, including the Annie E. Casey Foundation, the Brodie Price Philanthropic Fund, the Charles Stewart Mott Foundation, the Ford Foundation, the George Gund Foundation, the Lumina Foundation, the Nathan Cummings Foundation, the Open Society Institute, the Sandler Family Supporting Foundation, and others.

Views expressed do not necessarily reflect those of the Urban Institute, the Brookings Institution, their boards of trustees, or their funders.

Despite the intensity of the debate over President Bush's tax policies, all political factions seem to agree that tax and spending programs should, on average, distribute economic resources from the rich to the poor. The arguments involve the amount of redistribution; only fringe groups ask whether it should occur at all.

Liberals argue that a tax policy change is fair if it reduces discrepancies in the distribution of after-tax income. Moderate conservatives focus on the share of the cost of government borne by different income groups and argue that all is well as long as a tax change raises the share of the total tax burden borne by the more affluent. Many pure conservatives favor a flat tax, and some believe that the base of the tax should be consumption rather than income. Nevertheless, they believe in protecting lower income groups with large exemptions. They just don't care much about the distribution of economic resources among the middle class, the moderately rich, and the filthy rich.

Pure conservatives' ultimate policy goals are clearer than those of liberals and moderate conservatives. If liberal arguments were taken to an extreme, they would imply an egalitarian society—at least as measured by the distribution of after-tax income. The moderate conservatives' argument would imply that the very highest income earners would eventually bear 100 percent of the total tax burden. Presumably, neither side would go that far, but where would they stop?

Note: This report is available in its entirety in the Portable Document Format (PDF).

About the Author

Rudolph G. Penner is a senior fellow at the Urban Institute and holds the Arjay and Frances Miller chair in public policy.

Acknowledgments

The author thanks the Urban-Brookings Tax Policy Center for financial support and Len Burman and Eugene Steuerle for useful comments. Any errors or opinions are the author's and should not be taken to represent the views of the funders, officers, trustees, or staff of any of the institutions with which he is affiliated.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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