Paul L. Caron

Wednesday, May 24, 2017

Dodge:  The Personal Realization Income Tax

Florida Tax Review  (2015)Joseph M. Dodge (Florida State), The Fair Tax: The Personal Realization Income Tax, 19 Fla. Tax Rev. 522 (2016):

This article argues that the properly conceived fairness norm for taxation leads to a personal realization income tax. Fairness in taxation refers to “allocative tax fairness,” that is, the ethical/political standard according to which taxes are to be apportioned among the relevant population. In concrete terms, the standard constitutes the tax base for individual taxpayers. Allocative fairness is but one norm bearing on taxation, but it is one that (in academia, at least) has unjustifiably taken a back seat to economics and welfarist norms, largely due to the perception that allocative tax fairness lacks any specific content apart from the speaker's political and personal tastes and, therefore, by implication, is without independent normative grounding. The short riposte is that exclusive adherence to economic and/or welfarist norms is itself a matter of personal taste.

The more elaborate response entails showing that (1) fairness is an independent norm category apart from economics and welfarism; (2) allocative fairness matters in the construction of tax systems; and (3) allocative tax fairness has a discernable content. That content is conceptualized in the notion of “objective ability-to-pay,” which refers to an individual's realized net increase in material wealth over the taxable period (reduced by off-the-bottom allowances), and does not refer to utility, satisfactions, or well-being as such. The tax base that conforms to the objective ability-to-pay principle is that of a personal realization income tax, as opposed to (say) a personal wealth, accretion, or consumption tax.

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"Objective ability to pay principle?" Good luck with that. Did it ever occur to this author that the endless variation individual circumstances makes such a notion useless?

Posted by: Nathan | May 26, 2017 4:49:58 PM

LOL OMFG, I am a college grad and this article is total waste of space. FAIR, taxes are not FAIR and can NEVER be made FAIR. Taxes are how a Government manipulates public behavior. FAIR would dictate that EVERY EMPLOYEE pay into social security and medicare, so why are teachers and public employees EXEMPT, that's not FAIR. When I studied finance way back in the 70's, the home forclosure rate was 3%. Then some FAIRNESS politician decided that EVERYONE any ANYONE who wanted a home should get one. SO Banks were ordered to make loans to persons who were likely to default on payments, because that would be FAIR.
The resulting real estate crash and foreclosure debacle followed. FAIRNESS would dictate that Barney Frank be held personally liable, and be sent to prison.

Posted by: mark andres | May 25, 2017 8:33:15 AM