Tuesday, October 26, 2021
Manoj Viswanathan (UC-Hastings) presents Retheorizing Progressive Taxation at NYU today as part of its Tax Policy and Public Finance Colloquium hosted by Daniel Shaviro:
Tax progressivity is undeniably central to both the detailed analytics of tax policy and the rhetorical arguments commonly used in public discourse. Yet there are surprisingly inconsistent and inaccurate uses of this seemingly objective term. By theorizing progressivity’s constitutive elements and identifying its shortcomings, this Article offers a novel taxonomy of how progressivity is assessed and why contradictory assessments are common.
This Article argues that, as a theoretical matter, accurately characterizing tax provisions as progressive (or regressive) requires assessing their burdens beyond simply the tax payments remitted. By failing to account for effects such as economic incidence and inefficiency costs, traditional progressivity analyses are incomplete. Relatedly, since the spending side of the budget process is functionally indistinguishable from taxation, accurate progressivity analyses must also consider where tax revenues are spent. This Article suggests that earmarked tax assessments—taxes allocated to specific purposes—could overcome some of these challenges.
Asking about a tax provision’s progressivity is often to ask the wrong question. To the extent tax policy is concerned about effects such as, e.g., unemployment, poverty, and other specific outcomes, whether or not a tax provision satisfies an arbitrary definition of “progressive” is irrelevant. But since progressivity as a rhetorical concept will invariably persist in tax policy debates, it is crucial to reconcile the inconsistent and inaccurate uses of the term. By theorizing progressivity’s constitutive elements, providing an improved framework for its assessment, and proposing tax policy designs to more easily measure it, this Article improves the public’s ability to understand how tax policies impact them. Claims regarding a provision’s progressivity must state not only whether the provision is progressive, but convey exactly how it is progressive, and to a more accurate degree. Without this framework, our tax policy conversations about progressivity will remain flawed, overly simplistic, and difficult to refute.