A Brief Theory of Taxation and Framework Public Goods

Abstract

The literature on the question of how best to distribute the burden of taxation is technical and vast. However, in order for there to be a tax burden to distribute, there must first be a relatively stable social order that establishes, among other things, property rights. But the establishing of property rights is not costless; some revenue must have already been collected. How does one evaluate the distributive implications of a system of revenue collection that is a precondition for distributive questions? The dominant response to this question is to move beyond it by noting that, as a matter of fact, we are no longer in this liminal position and so we can sensibly discuss how best to distribute the tax burden.

In this short chapter I argue for two basic points: First, as to the funding of the set of basic goods that make distributive questions possible, which I call “framework” goods, there is a strong argument that we should relax our demands for use of the “best” tax system. Second, there are likely more scenarios in which this insight about the financing of framework goods applies than one might think. Put simply, if we think a developing country would be well-justified in using a sub-optimal set of taxes to provide framework goods, and I think that we should, then it should also follow that a developed country would be well-justified in using a sub-optimal set of taxes to provide near-framework goods.