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The question of whether income or consumption is a more appropriate tax base has a long and venerable history. Thomas Hobbes, Adam Smith, Alexander Hamilton, and John Stuart Mill all weighed in on the issue. In recent decades, the academic discourse has spread into the mainstream political arena.

One participant in the debate over the appropriate tax base, and one whose voice has attracted relatively little attention, is the philosopher John Rawls.

In his monumental work, A Theory of Justice, Rawls claimed that when background institutions are just and income is fairly earned, then a proportional consumption tax would be preferable to a progressive income tax. He gives two reasons for advocating consumption as a tax base rather than income. The first is that a consumption tax ‘imposes a levy according to how much a person takes out of the common store of goods and not according to how much he contributes.’ The second is that a consumption tax ‘treats everyone in a uniform way.’

This post will consider the common store argument. The question that I would like to explore is whether Rawls’ common store argument for consumption taxation is compatible with his principles of justice, as described in A Theory of Justice and in Rawls’ other writings.

A problem that arises when we attempt to analyse the common store argument is that Rawls did not explain in what sense consuming one’s own resources detracts from the ‘common store’ of goods. A second problem is he did not explain how taxing consumption correlates to his underlying principles of justice, which emphasize political liberties and the equal value of those liberties, fair equality of opportunity, and concern for the least well-off members of society.

Analogy with ‘common assets’: talents and goods

One might attempt to draw an analogy between Rawls’ view of natural talents as a common asset and his description of consumption as a taking from a common store.

According to Rawls, individuals do not deserve the natural talents that they happen to possess. He goes to claim that, in itself, the unequal distribution of talents is neither just nor unjust. It is simply a natural fact. What is just or unjust is how institutions deal with the unequal distribution of talents. Rawls argues that individuals behind the veil of ignorance would choose to consider talents, by whomsoever possessed, to be common assets and to share in the social and economic advantages that those talents make possible.

However, the implementation of this idea is problematic. Talents are, in fact, possessed by individuals. The principle of liberty precludes forcing individuals to use the talents that they possess. It is therefore necessary to provide incentives to encourage the socially beneficial use of talents. Rawls was willing to accept the resulting unequal distribution of income and wealth, provided that it ultimately operates to the benefit of the least well-off.

The analogy between talents and goods might proceed as follows. Possession and ownership are two distinct concepts. There exist talents that are jointly owned by society (‘common assets’), even though they are physically possessed by individuals. Similarly, there exist goods that are jointly owned by society (‘common store’), even though they are physically possessed by individuals. As we provide economic incentives to encourage the possessors of talents to use them for the benefit of society, we can provide economic incentives, such as deferring taxation from the time that income is earned until the time that it is consumed, to encourage the possessors of goods to use them for the benefit of society.

The analogy ultimately fails. The primary impediment from a Rawlsian perspective to the forcible expropriation of talents is the principle of liberty. The principle provides the possessors of talents with an effective veto over their exploitation and forces society to pay for exploiting what is, in theory, its own property. In contrast, society has the means, should it wish, to take possession of goods that it owns (which are part of the ‘common store’) against the will of the current possessor. Freedom from enslavement (being forced to use one’s talents against one’s will) is a basic liberty, lexically prior to any consideration of distributive justice, but the freedom from interference in the possession of property is not.

Private property as a charge against public assets

What if we were to view all goods as under common ownership, but to stipulate that against certain goods, individuals have charges that grant the owners physical possession of the goods and the right to consume them at will? These charges would be permitted either as an incentive to exploit beneficial talents for the common good or as a means of achieving distributive justice.

Taking this approach, the deferral inherent in consumption taxation is an incentive for individuals to refrain from consuming the goods in their possession.

Such a construction faces both substantive and structural challenges.

The substantive challenge is that Rawls suggests consumption taxation is preferable to income taxation because the former encourages the retention of the wealth and discourages consumption. However, Rawls was very concerned that wealth confers political power and undermines the equal worth of political liberties.

Therefore, even if we accept Rawls’ implicit assumption that retention of wealth is economically beneficial for society, the choice of consumption over income for a tax base would entail an impermissible sacrifice of equal political liberties or of the equal worth of political liberties for economic efficiency.

The structural challenge is that in accordance with the Cary Brown theorem, a consumption tax is equivalent to an income tax in which return to capital is excluded from the tax base. In other words, a consumption tax of x% is equal to an income tax with a tax rate of x% on wages and a tax rate of 0% on investment income. The problem here is Rawls’ quite reasonable assertion that theory alone cannot determine the appropriate tax rate. However, by advocating a consumption tax, Rawls is effectively saying that while theory cannot determine the proper rate of tax on wages, it can determine the proper rate of tax on investment income. It is difficult to imagine that there is any principled reason for – nor did Rawls produce any evidence to support – that distinction.

Is consumption morally censurable?

As an alternative, we may consider Rawls’ common store argument as reflecting a conception that consumption – or at least excess consumption – is on some level morally censurable. On this view, the purpose of taxing consumption is not to make markets operate more efficiently, but rather to redress a deontological wrong.

However, this attempt to justify consumption taxation does not conform to Rawls’ overall theory of justice. The moral legitimacy of (excessive) consumption is a subject matter for what Rawls refers to as ‘comprehensive doctrines’ and as such is inadmissible in the realm of public reason.

For Rawls, a ‘comprehensive doctrine’ is a particular conception of what has value in life and of the ideals of personal character. Under Rawlsian political liberalism, the state must remain neutral with regard to the various conceptions of the good and reliance upon any particular comprehensive doctrine in matters of basic justice or issues of public policy is impermissible.

Thus, political liberalism would forbid the adoption of policies that rely, for example, on the notion that Stoicism or religious asceticism is preferable to hedonism. An argument for consumption taxation that proceeds from a negative view of hedonism (or of “carpe diem”) is inadmissible in the sphere of public reason.

A more comprehensive understanding of Rawls’ theory is needed

Rawls’ ‘common store’ argument is rather laconic. He does not explain in what sense privately possessed goods are part of the common store, nor does he explain how taxing those who take out of the common store of goods conforms to his overall theory of justice. My attempts, as described above, to understand and justify his claim proved unsuccessful.

From a broader perspective, Rawls’ theory of justice is extraordinarily complex and does not easily fit into traditional political categories. For instance, although the bedrock of his theory of distributive justice is that individuals do not deserve their social position or their natural talents and thus have no desert-based claim to their income or wealth, he is equally adamant that, at least when background institutions are just, individuals have an entitlement-based claim to the income and the wealth that their talents and good fortune are able to secure.

In fact, one of the primary themes of Rawls’ entire scheme of justice is his attempt to break free of the utilitarian-libertarian dichotomy and to reconcile the concepts of deontological rights and redistribution. Writers in the field of tax theory tend to gloss over these subtleties and to apply Rawlsian concepts in a fairly superficial manner.

My hope is that this analysis will act as catalyst to a more comprehensive understanding of Rawls’ theory of justice in tax theory discourse.


Further reading

Elkins, D 2019, ‘Consumption Taxation in Rawls’ Theory of Justice’, Cornell Journal of Law and Public Policy, Forthcoming. Available at SSRN:

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