The Myth of Ownership

239 Pages·2002·1.938 MB·English

by  Liam Murphy & Thomas Nagel

The Myth of Ownership:
Taxes and Justice
LIAM MURPHY
THOMAS NAGEL
OXFORD UNIVERSITY PRESS
The Myth of Ownership
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The Myth of Ownership
Taxes and Justice
liam murphy
&
thomas nagel
1
2002
3
Oxford New York
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Copyright © 2002 by Oxford University Press, Inc.
Published by Oxford University Press, Inc.
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Oxford is a registered trademark of Oxford University Press
All rights reserved. No part of this publication may be reproduced,
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without the prior permission of Oxford University Press.
Library of Congress Cataloging-in-Publication Data
Murphy, Liam B., 1960–
The myth of ownership : taxes and justice / by Liam Murphy and Thomas Nagel.
p. cm.
Includes bibliographical references and index.
ISBN 0-19-515016-3
1. Tax incidence—United States. 2. Taxation—Social aspects—United States.
3. Distributive justice—United States. I. Nagel, Thomas, 1937– II. Title.
HJ2322.A3 M87 2002
336.2'00973—dc21 2001046486
1 3 5 7 9 8 6 4 2
Printed in the United States of America
on acid-free paper
Preface
In the fall term of 1998, we gave a joint seminar at NYU Law
School on Justice and Tax Policy. When the term was over, it
occurred to us that we might have the material for a book on
the subject. We began writing in the summer of 1999, and this
is the result.
We owe a large debt of gratitude to the participants in that
seminar, both students and faculty, who helped us to explore
an unfamiliar field and unfamiliar material. Our students
gave us valuable critical responses and made the course a
pleasure to teach.
We cannot begin to thank sufficiently for their indispens-
able help six present and past members of the NYU tax
faculty, who with patience and generosity took on the edu-
cation of a couple of amateurs: David Bradford, Noel
Cunningham, Deborah Paul, Deborah Schenk, Daniel
Shaviro, and Miranda Stewart. In addition, Barbara Fried
was visiting NYU from Stanford the year we taught our semi-
nar, and her advice and criticism have been enormously help-
ful throughout.
After we began writing, we got valuable responses when
we presented parts of the material to various audiences: to
the Tax Policy Colloquium at NYU conducted by David
vi vi CoPnrteenfatsce
Bradford and Daniel Shaviro, to the Law and Philosophy
Colloquium at NYU, and to audiences at Harvard, Duke, The
University of North Carolina at Chapel Hill, University Col-
lege London, the Central European University in Budapest,
and the Centro di Ricerca e Studi sui Diritti Umani in Rome.
We have benefited from written comments on various
parts of the manuscript from Janos Kis, Marjorie Kornhauser,
and Daniel Shaviro, and also from conversation with Ronald
Dworkin and Lewis Kornhauser. We are exceptionally grate-
ful to four people who gave us detailed comments on the
whole manuscript: Barbara Fried, Eric Rakowski, Joel
Slemrod, and Lawrence Zelenak. Their penetrating and tren-
chant criticisms and constructive suggestions have allowed
us to improve the book immeasurably. Without the gener-
ous attention of these experts on the law and economics of
taxes we could not have produced a halfway respectable re-
sult.
Both of us received research support during the writing
of the book from the Filomen D’Agostino and Max E.
Greenberg Faculty Research Fund of New York University
Law School. During the 2000–2001 academic year Liam
Murphy was a Fellow of the National Humanities Center.
We started out by calling the book Justice in Taxation, but
decided later on this more provocative title, partly at the
urging of our editor at Oxford University Press, Dedi Felman.
It seemed a good idea to make clear in the title where we
stood. But the book is not designed just to defend a thesis: It
aims to provide an accurate guide to the issues and to the
arguments on all sides, and we hope that even those who
disagree with us about the correct approach to justice in tax
policy will find their views fairly represented here.
New York, September, 2001 L. M.
T. N.
Contents vii
Contents
Chapter 1. Introduction, 3
Chapter 2. Traditional Criteria of Tax Equity, 12
I. Political Morality in Tax Policy: Fairness, 12
II. Vertical Equity: The Distribution of Tax Burdens, 13
III. The Benefit Principle, 16
IV. Ability to Pay: Endowment, 20
V. Ability to Pay: Equal Sacrifice, 24
VI. Ability to Pay as an Egalitarian Idea, 28
VII. The Problem of Everyday Libertarianism, 31
VIII. Horizontal Equity, 37
Chapter 3. Economic Justice in Political Theory, 40
I. Political Legitimacy, 40
II. Consequentialism and Deontology, 42
III. Public Goods, 45
IV. Benefits for Individuals, 48
V. Efficiency and Utilitarianism, 50
VI. Distributive Justice, Fairness, and Priority
to the Worst Off, 53
viii Contents
VII. Equality of Opportunity, 56
VIII. Legitimate Means and Individual Responsibility, 58
IX. Rewards and Punishments, 60
X. Liberty and Libertarianism, 63
XI. The Moral Significance of the Market, 66
XII. Personal Motives and Political Values:
The Moral Division of Labor, 70
XIII. Conclusion, 73
Chapter 4. Redistribution and Public Provision, 76
I. Two Functions of Taxation, 76
II. Paying for Public Goods, 79
III. Which Goods Are Public?, 86
IV. Redistribution, 88
V. Transfer or Provision?, 90
VI. Public Duties, 93
VII. Conclusion, 94
Chapter 5. The Tax Base, 96
I. Efficiency and Justice, 96
II. Outcomes, not Burdens, 98
III. The Consumption Base and Fairness to Savers, 99
IV. Fairness as Equal Liberty, 103
V. Desert and the Accumulation of Capital:
The “Common Pool”, 109
VI. Wealth and Welfare, 112
VII. Wealth and Opportunity, 119
VIII. Endowment and the Value of Autonomy, 121
IX. Exclusions and Credits, 125
X. Transitions, 128
Chapter 6. Progressivity, 130
I. Graduation, Progression, Incidence,
and Outcomes, 130
II. Assessment of Outcomes, 132
III. Optimal Taxation, 135
IV. Tax Reform, 139
Contents ix
Chapter 7. Inheritance, 142
I. The “Death Tax”, 142
II. The Tax Base of the Donee, 145
III. No Deduction for Donors, 148
IV. Details and Objections, 150
V. Equal Opportunity and Transfer Taxation, 154
VI. Conclusion, 159
Chapter 8. Tax Discrimination, 162
I. Justifying Differential Treatment, 162
II. An Example: The Marriage Penalty, 166
III. Incentive Effects and Arbitrariness, 169
Chapter 9. Conclusion: Politics, 173
I. Theory and Practice, 173
II. Justice and Self-Interest, 177
III. Plausible Policies, 181
IV. Effective Moral Ideas, 188
Notes, 191
References, 209
Index, 221