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Tax Justice Reconsidered

Cutting taxes has been the religion of free market conservatives ever since the days of Ronald Reagan and Margaret Thatcher. Now others, including President Jacques Chirac of France, Edmund Stoiber in Germany, and even Sweden's socialists have joined the call for lower taxes. Economic efficiency is the main argument used to justify tax cuts, but confused claims of tax "fairness" have always played an important role as well. Surprisingly, the same confusion afflicts both supporters of tax cuts and their opponents.

Taxes are a society's most important instrument for enacting its overall conception of justice. But most debates about tax justice consist merely in conflicting claims concerning the fairest way to share out tax burdens among different income groups. This approach is hopelessly myopic, because there is no way to evaluate the fairness of any distribution of tax burdens relative to income if you consider this distribution in isolation from the values that a society esteems and aims to uphold.

Consider the controversy about whether graduated income taxes should be replaced by a single-rate or "flat" tax. Russia's 13% flat tax, introduced last year, has been much praised by American conservatives, including President Bush, and the idea enjoys significant support in the US Congress.

While the official case for the introduction of a flat tax in Russia was largely one of economic efficiency, with a particular emphasis on increasing compliance, flat tax advocates in the US play up the fairness of taxing everyone at the same percentage. To many people, a flat or equal tax seems intrinsically fair.