Taxation and Public Finance: A Philosophical and Ethical Approach

Abstract

This paper applies philosophical and ethical concepts to the disciplines of taxation and public finance. It discusses various characteristics and attributes of the various forms of taxation, including whether taxation is voluntary or coercive, whether high rates or low rates are preferable from a variety of perspectives, the ability to pay and the cost benefit principles, uniform and discriminatory rates, tax administration, whether taxes should be visible or hidden, whether taxes should be earmarked or placed into the general fund, distortions to the economy that result from taxation, the effect of taxation on competitiveness and economic growth, tax complexity, vagueness, stability and frequently changing rules, the effect of taxation on behavior and incentives, and the effects on social harmony. Section III discusses the pros and cons of the various forms of taxation. There are separate discussions of the individual income tax, the corporate income tax, property taxation, the value added tax, retail consumption taxes, excise taxes, estate, inheritance and gift taxes, the social security tax, tariffs, inflation as a form of taxation, user fees, lotteries, and capital gains taxation. Part IV discusses the need to limit taxation and discusses various methods that have been advocated to achieve this goal, including a balanced budget amendment, the line-item veto, a supermajority requirement, the referendum, sunset provisions, stating an upper limit in the constitution and privatization.