Thursday, March 31, 2011
James R. Repetti (Boston College) presents Horizontal Equity Revisited (with Diane Ring (Boston College)) at Indiana-Bloomington today as part of its Tax Policy Colloquium Series. Here is the abstract:
In the years since a 1993 article by McDaniel and Repetti (“M-R”) evaluating the intellectual landscape of Horizontal Equity (“HE”), the appropriate role for HE in formulating tax policy has continued to generate controversy and debate. Perhaps one way to encapsulate the question after all this time is to ask – if we started with HE as our motivating concept in designing a tax system where would we be? If HE says treat equals the same, what does our tax system look like? The answer is – we don’t know because the term provides no guidance for selecting the criteria to measure equality or for defining fairness. We must turn to some theory of distributive justice to determine equality and to determine an appropriate tax burden. At this point, some argue that HE collapses into Vertical Equity (“VE”), the doctrine that an appropriate difference should be made among taxpayers who are different. As Musgrave and M-R point out, however, VE, itself, lacks normative content and is only a proxy for theories of distributive justice that determine the appropriate difference to be made among taxpayers. Framing the issues of equality and fairness in the tax system in the language of VE and HE has masked the emptiness of the concepts and overemphasized the possibility of two, distinct fairness inquires. We have been side-tracked from our larger task of tackling our disagreements about the underlying questions of distributive justice.
For those who remain committed to a gut sense that HE means something, we would say, “yes, but a different something.” Several of the post-1993 authors discussed in this article have constructed a role for HE that is not a role in determining tax burdens and tax equity. Although HE is not a useful tool for tax policy design, it is a useful tool for assessing governmental administration of tax laws. HE safeguards against arbitrary enforcement of tax laws and, therefore, stays at the forefront of tax consciousness because arbitrary enforcement would be particularly pernicious in a system that does not usually make public disclosures regarding each taxpayer’s liability for taxes. Perhaps because of the close link to tax policy and practice, the administrative role of HE (transmitting the norm of uniform enforcement of tax law to government actors) explains the unstated but visceral commitment to HE that has continued to spark debate over the past 20 years.