Taxation and democracy can be thought of as two sides of the liberal-democratic, capitalist social contract: Democracy concerns the making of collectively binding decisions, and taxation is the chief means to implement these agreed-upon plans within the market exchanges of free agents. Taxation thereby delineates the boundary of private property and collective responsibility, but it also shapes the material conditions under which citizens exercise their political autonomy. Taxation and democracy, along with their mutual dependencies and contradictions, in short, are deeply implicated in social scientific questions of rule and power, social integration and inequality.
As institutions, they are also the (only?) site, where progress might happen. This seminar looks at two such reform proposals, equally radical and pragmatic: progressive taxation and deliberative democracy.
“Give and take. Welcome to Washington.” – Frank Underwood Fictional US House of Representatives Majority Whip, “House of Cards” (2013)
The Thunder of World History
“The spirit of a people, its cultural level, its social structure, the deeds its polity may prepare – all this and more is written in its fiscal history, stripped of all phrases. He who knows how to listen to its message here discerns the thunder of world history more clearly than anywhere else.” – Joseph Schumpeter (1918: 6)
OECD states are all mixed economies, in which markets and states must co-exist. Of all conceivable institutions to govern the interface of states and markets, taxation – not price controls, not expropriation, not debt, not printing money, not tariffs – is the most equitable, efficient and sustainable. Welfare states, with their penchant for market interventions for equity, efficiency and and sustainability, especially, rely on good taxes.
Instead, taxation everywhere in the OECD is in crisis. As alternative sources of economic relief – monetary expansion and sovereign debt – are maxed out, structural misalignments persist, and previously forestalling (asset) bubbles have burst into their days of reckoning, public revenues appear to be strictly limited by the longtime coming contradictions of current tax regimes. The popular mixture of (progressive) income, (proportional) consumption and (regressive) payroll taxes appears to offer only harshly unattractive trade-offs between equity and efficiency, as bases have shrunk and schedules flattened. If governments cannot raise the resources necessary to meet democratic demands without incurring prohibitive costs, the social contract is fraying. Whichever way governments now turn, absent better tax, they will violate the post-war capitalist compact of stable, widely shared growth.
Three proposals for fundamental tax reform stand out:
- Progressive Consumption Tax (cashflow based, postpaid)
- Negative Income Tax
- Land Value Tax
These taxes supposedly offer more attractive trade-offs between equity, efficiency and sustainable, but they are hardly mentioned in the mainstream of tax reform, and have never been implemented in full. Aside from their possible desirability and feasibility, these hypotheticals help draw out some of the unfamiliar abstractions at play in any tax regime, including, for example, vexing incentive problems, contradictory savings norms and indeterminate incidence.
The Forceless Force of the Better Argument
“[A]nyone acting communicatively must, in performing any speech act, raise universal validity claims and suppose that they can be vindicated.” – Jürgen Habermas (1979: 2)
OECD states are, for the most part, liberal, pluralist and representative democracies. Collectively binding decisions are arrived at by relatively autonomous and competent citizens, communicating their (competing) interests through various associations, and aggregating their preferences through elections and votes.
This institutional form of democracy, too, is seen to be in crisis by some observers. A posteriori, political psychology and political sociology chronicle inconsistent preferences, non-existent attitudes and lacking knowledge at the micro- and macro level. A priori, public choice theory and political economy describe aggregation paradoxes, collective action problems and state capture.
Deliberative democracy responds to these challenges by stressing enlightened understanding, common-good orientation and mutual reason-giving in reaching collectively binding decisions, ideally by consensus. In various formulations, deliberative theory also revises central tenets of pluralism. Deliberative theory assumes preferences to be intersubjective instead of pre-social, rejects special interests in favor of a Rawlsian “veil of ignorance” and considers justifications, not aggregation, to be legitimizing.
There is some practical experience with deliberative fora, variously characterized by broad participation of ordinary and diverse citizens, extensive and egalitarian discussions, moderated small groups, carefully balanced information and learning phases. Although some uncertainty about the ultimate standards for, and designs of good deliberation remains, deliberative experiments ranging from electoral systems design to renewable energies strategies have yielded some encouraging results, including a better-informed, more consistent and engaged citizenry less prone to aggregation failures or divisive politics.
A Case and a Method
After surveying the pertinent literatures on (progressive) taxation and (deliberative) democracy, the seminar turns to the intersection between the two.
On the one hand, deliberative democracy might be a good method to test one explanation for the absence of better tax: we might have bad taxes, because we harbor systematic misunderstandings about taxation, which deliberations should clear up. But deliberation is also more than a method: it might be the discourse ethic to resolve the substantive disagreements in tax choice, that cannot be relegated to experts.
On the other hand, progressive taxation is a good case to test the promise of deliberative democracy: it affects everyone, yet is poorly understood and raises complexities and abstractions that few deliberative experiments have faced so far. But progressive taxation is also more than a case: it might be the economic intervention to guarantee the manifest political equality in the face of economic inequality on which deliberative democracy rests.
Throughout the course, students will familiarize themselves with seminal, often primary texts pertinent to taxation and democracy, including from welfare economics, public choice, political psychology, moral philosophy, and law. Moreover, students will explore the normative, ontological and epistemological foundations of both deliberative democracy and progressive tax reform, apply them, and articulate their own position.
In addition, students will have the opportunity to participate in a Q-sort of tax-related statements both at the beginning and the end of the class to compare how their own subjectivity on taxation may evolve over the course of the seminar.
Prior knowledge of introductory economics would be advantageous, but is not required for participating in the seminar. Language of instruction will be english. Students are expected to read primary texts in english, as well as to participate in class in english. Students should also feel comfortable using web-based social networks and word-processing, some of which may be used in the seminar.
Students write a (graded) essay (about 5000 words) on a topic of their choosing, based on the literature discussed in class, due July 31st, 2014 23:59.
Students also prepare presentations, respond to reading prompts and participate in class as well as online.
- this (
maxheld83/samuelsonis the class/draft fork of
civicon/samuelson. We should make sure to pull in upstream changes.
- this is where we do our writing work, it is also where we track issues.
- (there is no repo for this class per se; there is only
- the literature list is also in here.
- this is where you find what would normally be in a syllabus; what we do when, what to read, etc.
- participants can edit the wiki, too.
You can find the complete bibliography in this repo, including a lot of recommended reading.
Here are the mandatory readings for the class, divided by sessions.
- Public Economics of Taxation
- Stiglitz 2000 (Textbook)
- (Ontological) Theories of the Economy
- Reiss (2013) on Philosophy of Economics: Chapters 1, 2, 3, 12, 13, 14
- Schumpeter (1942) on Capitalism (highly recommended, but not mandatory)
- Dooley (2005) on Labor Theory of Value
- Hayek (1945) on Libertarianism
- Spicer (2005) on Hayek and Taxation
- (Normative) Theory of Taxation
- Deutschmann (2011) on Pragmatism
- Bankman 1987 (Paper) on Progressivity
- Murphy (2002) on Ownership: Chapters 1, 2, 3, 5, 9
- Slemrod (2008) on a Citizens Guide: Chapters 1, 3, 4, 7
- Holmes & Sunstein (2012) on The Costs of Rights (highly recommended, but not mandatory)
- Hausman (2012) on Preferences (highly recommended, but not mandatory)
- (Preferences) Alternative Taxes
- Progressive Consumption Tax (Cash-flow based)
- Frank (2005aa, 2005b) on Expenditure Cascades
- McCaffery (2005b) on PCT
- Land Value Tax
- George (1879ab) on Land Value Tax
- Tomlinson (2001a) on implementation