The role of political elites in income tax system design and tax fairness

Abstract

Given the importance of fairness in the public acceptance of tax systems (Mirrlees et al., 2011), understanding the role of political elites in the tax design process and how this impacts fairness is important. In this paper, we use an interpretative approach to examine the design and ultimate rejection of the Kansas tax policy experiment that ran from May 2012 to June 2017. The central design element of this experiment was the fundamental disruption of the long-standing principle of horizontal equity (fairness), in which non-wage business income was relieved of income tax, while wage income was taxed. By interpreting this experiment through a Bourdieusian lens, we identify five key themes that are helpful in understanding income tax design, tax fairness, and the role played by political elites. Overall, we contribute to the literature by highlighting the way in which cultural capital may be used by political elites to reformulate groups of taxpayers in order to justify unequal treatment of equal taxpayers, which represents a violation of the notion of horizontal equity (fairness). We also highlight that although such violations of fairness in income tax system design may be sustainable in the short run, over the longer term, notions of fairness are so deeply embedded in the habitus of individual taxpayers that a return to the status quo is likely.