Thursday, September 9, 2021
Clint Wallace (South Carolina; Google Scholar) presents The Democracy Criterion for Taxation virtually today as part of the Indiana Tax Policy Colloquium hosted by Leandra Lederman:
Tax scholars generally focus on the normative criteria of equity and efficiency in evaluating and designing tax policies, with little regard for governing context. Political theorists often focus on the conditions that shape a democratic community and can help it to flourish, with little regard for taxation. At a time when scholars are increasingly recognizing that public finance—and thus, taxation—is critical to repairing and sustaining democracies around the world, this Article begins to bridge the gap between tax theory and democratic theory.
This Article offers an account of democracy as a central consideration in taxation. I propose a “democracy criterion,” which would join equity and efficiency as a normative framework for evaluating tax policy in the design of any tax system or tax policy change. The democracy criterion described here captures inputs that contribute to democratic legitimacy and outputs that contribute to democratic vitality. On the inputs side, the democracy criterion asks: is the process that produces a change in tax law or tax rules democratically legitimate? This Article draws on democratic theory to presents one conception of democratic legitimacy for taxation. On the outputs side, the democracy criterion asks: does a change in tax law or tax rules strengthen or undermine democratic governance? Again drawing on democratic theory, this Article identifies connective tissues where taxation might enhance democracy.
I conclude by exploring the democracy criterion through an evaluation of three episodes in American tax history: tax structures in early British colonies in the U.S., local school financing campaigns in the 1970s, and the reductions in the top tax rates for ordinary income, capital gains, and the corporate income tax in the 2000s. For each, I evaluate the democratic legitimacy of tax policies, and their effects on democratic vitality.