Taxation, the state, and the community

Social Philosophy and Policy

Volumn 23, Issue 2, 2006, Pages 210-234

  Schoenblum, Jeffrey ^a  

^a VANDERBILT UNIVERSITY   (United States)

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EID: 33745668666     PISSN: 02650525     EISSN: 14716437     Source Type: Journal    
DOI: 10.1017/S0265052506060237     Document Type: Review

References (88)

1. For the public finance perspective, see, for example, Richard A. Musgrave and Alan T. Peacock, eds., Classics in the Theory of Public Finance (London: MacMillan, 1958),
2. See also Richard A. Musgrave, "The Nature of the Fiscal State: The Roots of My Thinking,"
3. in James M. Buchanan and Richard A. Musgrave, Public Finance and Public Choice: Two Contrasting Visions of the State (Cambridge, MA: The MIT Press, 1999), 29-49.
4. See Musgrave and Peacock, eds., Classics, xi.
5. Initially, the determination of public expenditures was regarded as a political matter (see ibid.). See also Adolf Wagner, "Three Extracts on Public Finance," in Musgrave and Peacock, eds., Classics, 1, 5. This is not to say that contemporary public finance ignores the linkage between taxation and distribution. For example, optimal tax theory takes account of the effects of different tax-rate structures on individual utilities. It is a highly stylized mathematical approach. Thus, it, too, fails to take account of patterns of social-political behavior and self-interest that inevitably affect distributional decisions. For an excellent discussion of the optimal tax theory,
6. see Lawrence Zelenak and Kemper Moreland, "Can the Graduated Income Tax Survive Optimal Tax Analysis?" Tax Law Review 53 (1999): 51.
7. See note 1 above. Even Musgrave recognized the problem with an unquestioning faith in expertise. See Buchanan and Musgrave, Public Finance and Public Choice, 34. Nevertheless, according to Musgrave, the "vision of efficient government" is required as a standard by which performance can be measured. Furthermore, it should be regarded as attainable with the proper leadership. Musgrave emphasized that it is not "beyond the capacity of representatives and officials to seek the public interest"
8. Buchanan and Musgrave, Public Finance and Public Choice, 34 (ibid.)
9. See, for example, James M. Buchanan, "Response,"
10. in Buchanan and Musgrave, Public Finance and Public Choice, 85-86.
11. See also James M. Buchanan and Roger D. Congleton, Politics by Principle, Not Interest: Toward Nondiscriminatory Democracy (Cambridge: Cambridge University Press, 1998)
12. James M. Buchanan and Gordon Tullock, The Calculus of Consent: logical Foundations of Constitutional Democracy (Ann Arbor: University of Michigan Press, 1962);
13. and Geoffrey Brennan and James M. Buchanan, "The Tax System as Social Overhead Capital: A Constitutional Perspective on Fiscal Norms," in Dieter Biehl et al., eds., Public Finance and Economic Growth: Proceedings of the Thirty-seventh Congress of the International Institute of Public finance, Tokyo, 1981 (Detroit: Wayne State University Press, 1983), 41.
14. Charles Jones, "Patriotism, Morality, and Global Justice," in Ian Shapiro and Lea Brilmayer, eds., NOMOS XLI: Global Justice (New York: NYU Press, 1999), 125, 148.
15. There are other substantial problems with a net-benefits approach as well. These are discussed in Jeffrey Schoenblum, "Tax Fairness or Unfairness? A Consideration of the Philosophical Bases for Unequal Taxation of Individuals," American Journal of Tax Policy 12 (1995): 221, 225.
16. See Lionel Roberts, "Interpersonal Comparisons of Utility," Economic Journal 48 (1938): 635, 637-40.
17. See generally Stephen Utz, "Ability to Pay," Whittier Law Review 23 (2002): 867, 930.
18. One tax scholar has argued for a more communitarian approach to tax equity. See Reuven Avi-Yonah, "Why Tax the Rich? Efficiency, Equity, and Progressive Taxation," Yale Law Journal 111 (2002): 1391. However, the only community Avi-Yonah apparently
19. sees is the mythic national community, Yale Law Journal (ibid., 1402).
20. Michael C. Dorf and Charles F. Sabel, "A Constitution of Democratic Experimentation," Columbia Law Review 98 (1998): 267, 341. A particularly intriguing discussion of this topic is presented in the context of the resistance to the private purchase of terrorism insurance.
21. See Jeffrey Manns, "Insuring against Terror?" Yale Law Journal 1.12 (2003): 2542-43.
22. Indeed, the argument has been made that the liberal conception of the unencumbered self is mistaken, that human nature is social, and that human beings necessarily define themselves in terms of their culture. In other words, association is not merely motivated by conscious pursuit of self-interest. See Michael Sandel, Democracy's Discontent: America in Search of a Public Philosophy (Cambridge, MA: Belknap Press of Harvard University Press, 1996).
23. Daniel Bell, Communitarianism and Its Critics (Oxford: Clarendon Press, 1993), 31-39.
24. See, e.g., Stephen Holmes, "The Structure of Antiliberal Thought," in Nancy L. Rosenblum, ed., Liberalism and the Moral Life (Cambridge, MA: Harvard University Press, 1989), 227, 228, where Holmes concedes "that concepts such as the pre-social self who enters civil society with a fully-formed identity were never meant to be metaphysical or ontological descriptions of psychological reality, but were instead mere rhetorical devices developed to demonstrate the injustice of certain political arrangements."
25. See note 11. above. Daniel Bell refers to communities of place, communities of memory, and psychological communities.
26. The Internal Revenue Code affords a number of tax benefits to married couples. By filing a joint return, they may be able to split income even when only one works and thus avoid some of the effects of progressive rates. They can also transfer wealth and gains between them, including by sale, without the recognition of income for taxation purposes. Finally, they can make unlimited transfers between them by gift or inheritance without gift tax or estate tax.
27. Anthony de Jasay, The State (Oxford: Basil Blackwell, 1985), 42-43.
28. Musgrave takes issue with contractarian accounts, but acknowledges their essential role in tax theory as a result of the inability to make reliable interpersonal utility comparisons. See Buchanan and Musgrave, Public Finance and Public Choice, 45-46.
29. For Edgard Allix, a leading pre-World War II French public finance scholar and political economist, the foundation of the state's "right" to tax rests on its very sovereignty. The state is a historical necessity. It has a right, indeed obligation, to tax in order to secure its existence: "Le premier droit et le premier devoir de l'Etat est d'assurer son existence et son fonctionnement et, à cet effet, d'exiger de ceux qui vivent sous sa loi les moyens nécessares." ("The primary law and duty of the state is to secure its existence and its functioning and, with these purposes, to require from those who live under its law, the necessary means.") Edgard Allix, "La Condition de Etrangers au Point de Vue Fiscal,"
30. in Recueil des Cours, Académie de Oroit International de la Haye 61 (1937): 545, 559.
31. See also Rutsel Silvestre J. Martha, The Jurisdiction to Tax in International Law. Theory and Practice of Legislative Fiscal Jurisdiction (Deventer: Kluwer Law and Taxation Publishers, 1989), 18-22.
32. See, for example, de Jasay, The State, 240-41, 247-48.
33. See Robert D. Putnam, Bowling Alone: The Collapse and Revival of American Community (New York: Simon and Schuster, 2000). For a critique of civil society revivalists,
34. see, e.g., Christopher L. Eisgruber, "Civic Virtue and the Limits of Constitutionalism," Fordham Law 'Review 69 (2001): 2131;
35. and Linda C. McClain and James B. Fleming, "Some Questions for Civil Society Revivalists," Chicago-Kent Law Review 75 (2000): 30. However, even the critics acknowledge the decline of civil society.
36. Kenneth Minogue uses the term "philosopher bureaucrat." See Kenneth Minogue, "Ideal Communities and the Problem of Moral Identity," in John W. Chapman, ed., NOMOS XXXV: Democratic Community (New York: NYU Press, 1993), 41, 58.
37. For the version of the bureaucracy as "experts" faithful to rules and rationality, see Max Weber, Economy and Society: An Outline of Interpretive Sociology (New York: Bedminster Press, 1968), 217-26, 956-1003.
38. In the view of some administrative law scholars, and casting them in a more positive light, the "experts" are obligated to take into account the social morality of rulemaking. See Jerry L. Mashaw, "Small Things Like Reasons Are Put in a Jar: Reason and Legitimacy in the Administrative State," Fordham Law Review 70 (2001): 17, 33.
39. Politicians may actually impose an expiration date on tax savings legislation and at each session may debate making the savings permanent so as to extract campaign contributions. One example is the debate in the U.S. over the repeal of the estate tax and the scheduled phase-out of tax benefits in 2010. See Linda Cohen, Edward J. McCaffery, and Fred S. McChesney, "Shakedown at Gucci Gulch: A Tale of Death, Money, and Taxes," USC-Caltech Center for the Study of Law and Politics, Working Paper No. 22, available at http://lawweb.usc.edu/cslp/papers/cslp-wp-022.pdf (accessed November 11, 2005).
40. See generally Fred S. McChesney, Money for Nothing: Politicians, Rent Extraction, and Political Extortion (Cambridge, MA: Harvard University Press, 1997);
41. and Elizabeth Garrett, "Harnessing Politics: The Dynamics of Offset Requirements in the Tax Legislative Process," University of Chicago Law Review 65 (1998): 501, 545-55.
42. Robert Dahl, "Why All Democratic Countries Have Mixed Economies," in Chapman, ed., NOMOS XXXV: Democratic Community, 259.
43. Francis Edgeworth, "The Pure Theory of Taxation," in Musgrave and Peacock, eds., Classics, 119.
44. See Sheryll D. Cashin, "Federalism, Welfare Reform, and the Minority Poor: Accounting for the Tyranny of State Majorities," Columbia Law Review 99 (1999): 552, 598-99, 621-22.
45. No figures on their share of total wealth are available.
46. That is not to say that an intelligent defense of this situation cannot be mounted. See, e.g., Ramesh Ponnuru, "Tax Cuts for the Poor," National Review Online, May 20, 2005, available at http://www.nationalreview. com/ponnuru/ponnuru200505200751.asp. For example, gaps in income may be explained by life-cycle effects, so that nontaxpayers can be expected one day to age into taxpayers.
47. These vestigial protections may have been substantially narrowed by the recent U.S. Supreme Court decision in Kelo v. City of New London, 125 S.Ct. 2655 (2005) (holding that the state can take property from one private owner and redistribute it to another for a "public purpose"; the property need not be taken by the state for "public use").
48. Liam Murphy and Thomas Nagel, The Myth of Ownership: Taxes and Justice (Oxford: Oxford University Press, 2002).
49. But see, e.g., Putnam, Bowling Alone. Putnam raises doubts about the continuing vibrancy of civil society at the local level.
50. In this regard, theories that hypothesize that the spreading of tax costs across the polity reduces opposition to redistribution are questionable. Constituents recognize the long-term threat to their wealth inherent in taxation and cannot be certain that they will recover (or have the time and resources to recover) it all by involvement in the redistributive political process. Each time the tax option is exercised, it confirms the state's potential to do it again.
51. Thomas Pogge, Realizing Rawls (Ithaca, NY: Cornell University Press, 1989), 246. Pogge, indeed, takes Rawls to task for, first, emphasizing that only persons matter, but then recognizing, as a second principle, that on international matters, nations, not persons, would decide behind the veil of ignorance.
52. Thomas Pogge, "An Egalitarian Law of Peoples," Philosophy and Public Affairs 23 (1994): 195-224.
53. See John Rawls, A Theory of Justice (Cambridge, MA: Harvard University Press, 1971), 378.
54. Thomas Hill Green, Liberal Legislation and Freedom of Contract: A Lecture (Oxford: Slatter and Rose, 1881).
55. Even if this were not the case, there might be a superior "justice" claim of the poorest, which would have to be balanced against the "special claims" of those with whom we have the closer affiliations. See Samuel Scheffler, "The Conflict between Justice and Responsibility," in Shapiro and Brilmayer, eds., NOMOS XLI: Global Justice, 86, 95.
56. See, for example, Charles Beitz, Political Theory and International Relations (Princeton, NJ: Princeton University Press, 1979), 143-53.
57. See Pogge, Realizing Rawls.
58. Hillel Steiner, "Just Taxation and International Redistribution," in Shapiro and Brilmayer, eds., NOMOS XLI: Global Justice, 171. Steiner has his own proposal of a global fund
59. NOMOS XLI: Global Justice (ibid., 176).
60. Hillel Steiner, "Just Taxation and International Redistribution" NOMOS XLI: Global Justice, 176, Ibid.
61. Hillel Steiner, "Just Taxation and International Redistribution" NOMOS XLI: Global Justice, 176, Ibid.
62. Liam B. Murphy, "Comment on Scheffler's 'The Conflict between Justice and Responsibility'," in Shapiro and Brilmayer, eds., NOMOS XLI: Global Justice, 116-17. Murphy recognizes the problem but suggests that there is enough to go around by taking from the Western "rich." As to how much might be required,
63. see Jeffrey Sachs, The End of Poverty: Economic Possibilities for Our Time (New York: The Penguin Group, 2005).
64. Bell, Communitarianism and Its Critics, 150-51.
65. Immanuel Kant, "Perpetual Peace: A Philosophical Sketch," in Kant, Political Writings, ed. Hans Reiss, trans. H. B. Nisbet (New York: Cambridge University Press, 1991).
66. Charles M. Tiebout, "A Pure Theory of Local Expenditures," Journal of Political Economy 64 (1956): 416. Tiebout was concerned with the efforts of competing municipalities to attract consumers of public goods, recognizing that consumers were limited to voting within their municipality, but could "vote with their feet" by physically moving to another municipality.
67. David J. Hayton, ed., Extending the Boundaries of Trusts and Similar Ring-fenced Funds (The Hague: Kluwer Law International, 2002).
68. Internal Revenue Code, section 865(a).
69. Fillman v. United States, 355 F.2d 632 (Cl. Ct. 1966). See Jeffrey A. Schoenblum, Multistate and Multinational Estate Planning, vol. 2 (Gaithersburg, MD: Aspen Publishers, 1999), 151-52. There are a variety of ways that Europeans can avoid taxation in their home countries, some legal and some illegal but not effectively enforced
70. Jeffrey A. Schoenblum, Multistate and Multinational Estate Planning, vol.2, 1999, 151-52.(see ibid.).
71. Joel D. Kurtz and Robert J. Peroni, U.S. International Taxation (Boston: Warren Gorham & Lamont, 2005), paragraph A2.03[1].
72. See, for example, William G. Hill, The Passport Report, 11th ed. (Hants, England: Scope International Ltd., 1996). Corporate-related techniques, such as transfer pricing and backto-back loans, abound.
73. See, e.g., Terrence R. Chorvat, "A Different Perspective on Tax Competition," George Washington International Law Review 35 (2003): 501, 510.
74. Robert T. Kudrle and Lorraine Eden, "The Campaign against Tax Havens: Will It Last? Will It Work?" Stanford Journal of Law, Business, and Finance 9 (2003): 37.
75. Reuven Avi-Yonah, "Globalization, Tax Competition, and the Fiscal Crisis of the Welfare State," Harvard Law Review 113 (2000): 1573. Of course, the gains may not be equitably or efficiently distributed among the populace of the tax haven.
76. Harvard Law Review 113 (2000): 1573.Ibid. Avi-Yonah argues that international tax competition has been a drain on welfare state resources and also claims that the low-tax or no-tax regimes of tax havens deprive their citizens of much-needed resources. Accordingly, on the basis of economic efficiency and equity grounds, he urges significant limitations on international tax competition.
77. Janice R. Bellace, "Labor Law for the Post-Industrial Workplace: Breaking the New Deal Model," in Benjamin Aaron et al., eds., Labor Law at the Crossroads: Changing Employment Relationships (The Hague: Kluwer Law International, 1997), 22.
78. Schoenblum, Multistate and Multinational Estate Planning, section 19.05[I].
79. The divergence, more generally, was identified by Karl Marx in "On the Jewish Question," in Robert C. Tucker, ed., The Marx-Engels Reader, 2d ed. (New York: Norton, 1978).
80. 56 See note 7.
81. Frank Hahn, "On Some Difficulties of the Utilitarian Economist," in Amartya Sen and Bernard Williams, eds., Utilitarianism and Beyond (Cambridge: Cambridge University Press, 1982), 195.
82. The precise figure is $248.52 billion for 2004. See Giving USA Foundation - AAFRC Trust for Philanthropy, Giving USA (Indiana University, 2005), with relevant data available online at http://aafrc.org/gusa/index.cfm? pg=giving.htm (pie charts), and http://aafrc.org/gusa/GUSA05_Press_Release.pdf (for a press release offering a detailed summary of the data).
83. "Pareto optimality" embodies the principle that members of a collectivity enjoy maximum ophelimity (economic satisfaction), such that any small departure from that position "necessarily has the effect of increasing the ophelimity which certain individuals enjoy, and decreasing that which others enjoy, of being agreeable to some, and disagreeable to others." Vilfredo Pareto, Manual of Political Economy (1927), ed. Ann S. Schwier and Alfred N. Page, trans. Ann S. Schwier (New York: August M. Kelley Pub., 1971), 261. In contrast, the difference principle tolerates distributive gains to some in the collectivity at the expense of others if these gains enhance the condition of the worst off.
84. See Rawls, A Theory of Justice, 76-83.
85. The deficiencies of the recipients may make failure in implementation inevitable. Joel F. Handler, "Discretion in Social Welfare: The Uneasy Position in the Rule of Law," Yale Law Journal 92 (1983): 1270, 1271-73;
86. Jerry L. Mashaw, "Welfare Reform and Local Administration of Aid to Families with Dependent Children in Virginia," Virginia Law Review 57 (1971): 818, 833.
87. See Murphy and Nagel, The Myth of Ownership: Taxes and Justice.
88. The early ability-to-pay theorists certainly regarded the determination of public expenditures as political in nature, rather than economic. See Musgrave and Peacock, eds., Classics, xi.