New light on Adam Smith’s view of taxation via the concept of equity

Abstract

This paper aims to defend Adam Smith’s ideas of taxation via moral philosophical approaches. In the conventional interpretation such a view is assumed to be inconsistent particularly due to the shortcomings of his economic theory. We suggest that via his notions of justice and equity, and of surplus income counted on an equilibrium basis in his natural price system, his argument for proportional taxation is rather coherent, while considerations for horizontal equity would result in a support for some progressivity in taxation. In the latter sense the equity-based tax reform plans have some policy implications on distributive justice in the modern state.