And Equal (Tax) Justice for All?
C. Eugene Steuerle
Concepts of equity and fairness are at the heart of tax policy. Polit-
ical leaders pay homage to these ideals in virtually every sphere of
lawmaking and regulation. Citizens, moreover, are keenly sensitive to
arguments about fairness in almost every policy debate.
Yet, for all its populist appeal, tax equity is loosely understood and
inconsistently applied. This concept comprises at least three distinct
dimensions: horizontal, vertical, and individual equity. The very real
tension among these components complicates efforts to craft “fair” tax
policy, prompting political debates that invoke the rhetoric of equity
without engaging its substance. The most vociferous arguments have
centered on the uneasy relationship between vertical equity—most
commonly manifested in progressive tax and expenditure structures—
and the demands of individual equity, in which individuals freely
engage in transactions of their own choosing. While support for some
application of vertical equity seems clear, determining the appropriate
degree of progressivity has proved to be difficult.
Various details further complicate efforts to apply tax equity in a rig-
orous and productive manner. Progressivity remains a touchstone in
debates over fiscal policy, yet it often means one thing when applied to
tax and something very different in discussions of spending. Moreover,
crafting fair tax policy is further confused by discussions about the
appropriate tax base—income, expenditure, or something else—as well
as the many adjustments that can be made to any of these bases. An
adjusted tax base often represents an attempt to define equality and
inequality along some measure of net well-being.
In the face of all this controversy and complexity, many theorists
have thrown up their hands. Many economists, in particular, have
often dismissed fairness as more an issue of aesthetics than of analysis.
A large contingent has not merely focused on questions of efficiency
but largely abdicated its rol