Thursday, February 28, 2019
Lily Batchelder (NYU) delivers the annual Richard Crawford Pugh Lecture on Tax Law & Policy at San Diego today on Optimal Tax Theory and Distributive Justice:
The literature on taxation and transfers includes two prominent egalitarian and consequentialist theories of distributive justice: Dworkin’s theory of resource egalitarianism, and welfare egalitarianism as elaborated through optimal tax theory. Advocates of each approach deny any substantial similarity with the other. This essay challenges that claim. It explores the ways in which the two theories overlap and diverge, and concludes that the gap between them is narrower than most appreciate. While the concerns motivating the two theories are fundamentally different, the ideal policy design principles implied by each largely mimic the other.
The failure of most of the existing literature to identify this similarity has two sources. First, objections to welfare egalitarianism and optimal tax theory are often predicated on an incomplete portrayal of what these theories actually say. Once read broadly and deeply, it becomes clear that they have compelling responses to many of the criticisms of resource egalitarians and other non-welfarists—including objections that they would reward so-called utility monsters, ignore non-market-based contributions to society, require those with high earning potential to work nonstop, and treat those who cannot act in their self-interest unfairly.
Second, optimal tax theory rarely takes the time to normatively justify some of its foundational assumptions, such as identical utility functions for resources, even though they are justifiable purely on welfarist grounds. At points, it also fails to adopt certain normative assumptions that are implied by welfare egalitarianism, including adjusting the tax rate (not strictly the tax base) based on people’s ex ante endowment of objective resources, and disregarding ex ante endowments entirely to the extent people’s underlying preferences evolve over time. More explicitly and consistently adopting and justifying these assumptions would clarify that optimal tax theory does not entail the extreme limits on autonomy or unrelenting responsibility for prior choices that have troubled non-welfarists.
Previous Richard Crawford Pugh Lectures on Tax Law & Policy:
- Anne Alstott (Yale), Child Care Reform After The Pandemic (2021)
- Rosanne Altshuler (Rutgers), The International Tax Landscape: Past, Present and Future (2020)
- Lily Batchelder (NYU), Optimal Tax Theory and Distributive Justice (2019)
- Deborah Schenk (NYU), Horizontal Equity Redux (2017)
- Michael Graetz (Columbia), Tax Reform Beyond the Headlines (2015)
- Edward Kleinbard (USC), Progressive Tax or Progressive Fiscal System? (2014)
- Stephen Shay (Harvard), Coherence in International Income Taxation (2013)
- M. Carr Ferguson (Davis Polk, New York), Simplifying the Corporate Income Tax (2011)
- Eric Solomon (Steptoe, Washington, D.C.), A Framework for Tax Reform (2010)
For more on Dick Pugh, see here.