Rawls, Taxation and Calabresi & Melamed’s Rules

Abstract

Abstract The paper identifies a new rule in the tax discourse – the versatility rule. Calabresi and Melamed’s landmark article contributed to the legal discussion despite paying relatively little attention to taxation. This paper analyzes income tax, Calabresi and Melamed’s rules and Rawls’ theory, and examines whether Calabresi and Melamed’s pioneering work on liability, property and inalienability rules can be integrated into income tax discourse (and other legitimate property expropriations); and claims that these rules assist in understanding the essence of taxation. The question is analyzed from the Rawlsian perspective since his concern with the “least advantaged” and inequality in society poses a serious global challenge. The paper offers a unique analysis by showing that in the tax field all rules protect the same entitlement at the same time against the same entity – the government. This concurrent implementation of Calabresi and Melamed’s rules in taxation can only take place when taxation is understood as both “giving” and “taking”. Although the paper aims at increasing distributive goals, it appears that efficient outcome is its byproduct. Integrating Calabresi and Melamed’s rules into the tax discourse via Rawls’ theory not only elucidates the versatility rule but also blurs the distinction between the protection and transfer rules, and highlights the reciprocity of the duty and right to pay taxes. Since Calabresi and Melamed’s classical work, many scholars have significantly modified the existing rules and developed new ones, such as the Solomonic entitlement and the pliability rule, though no one has thus far proposed a scenario in which all remedies simultaneously apply against the same entity.