Friday, April 13, 2012
Our tax system is supposed to serve the public good by fairly raising the revenue that we need to fund public expenditures — for example, the common defense, social safety net programs such as Social Security and Medicare, etc. But the tax reform debate has shifted away from discussing how best to distribute the burden of these common expenditures and instead has come to focus on how tax reform can be used to spur economic growth. Especially in times of economic crisis, these two goals — equitably funding public expenditures and spurring economic growth — sound equally important and somehow compatible. After all, shouldn’t a rising tide of economic growth lift all boats and make contributing to the common weal easier for everyone?
The problem, however, lies in the studies and reports indicating that recent cycles of economic growth have not been akin to a rising tide lifting all boats. Rather, economic growth has redounded largely to the benefit of a very few at the very top of the income scale. Or to continue with the tidal metaphor, the rising tide has lifted the yachts of the wealthy and privileged while swamping the rest of us. In that light, using tax reform as a vehicle to spur economic growth looks less like an endeavor of public benefit for all and more like one of private benefit with the purpose of entrenching the privilege of a relative few.
In this article, I call into question the idea that tax reform should be used to stimulate economic growth. Instead, drawing primarily upon the development literature and the work of the economist and philosopher Amartya Sen, I advocate a turn toward a people-centered approach to tax reform. I argue that tax reform debates should focus not on encouraging economic growth but, in keeping with the tax system’s basic purpose, on advancing human development for all — and particularly for the disadvantaged among us.