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103 Mich. L. Rev. 807 (2004-2005)
A New Understanding of Tax

handle is hein.journals/mlr103 and id is 827 raw text is: A NEW UNDERSTANDING OF TAX Edward J. McCaffery* TABLE OF CONTENTS I. INTRODUCTION................................................. .....809 A. Loomings..................................809 B. The Road Ahead ................................................................... 818 II. IN THEORY: THREE FORMS OF TAX.......................................... 819 A. An Example ........................................................................... 819 B . The Incom e Tax..................................................................... 821 C. Two Forms of Consumption Tax......................................... 824 D. Two Conditions of Equivalence........................................... 825 1. Constant Tax Rates ......................................................... 825 2. Constant Rates of Return................................................ 826 E. The Treatm ent of D ebt.......................................................... 827 III. A PROBLEM OF UNDERSTANDING............................................. 829 A. Means and Ends ....................................................................829 B. The Traditional Logic of Tax............................................... 832 C. The Modern Income-Versus-Consumption Debate........... 838 1. The Case for Consumption............................................. 838 2. The Income Empire Strikes Back .................................. 841 3. Why It Matters ................................................................. 843 * Robert C. Packard Trustee Chair in Law and Political Science, University of Southern California Law School; Visiting Professor of Law and Economics, California Institute of Technology. B.A. (Philosophy and Classics) 1980, Yale; J.D. 1985, Harvard; M.A. (Economics) 1994, University of Southern California. - Ed. Earlier versions of this Article were given as the Hugh J. and Frank Tamisiea Lecture at the University of Iowa School of Law, and at workshops at New York University School of Law, Southern California Law & Philosophy Reading Group, University of Southern California Law School, Southern California Tax Policy Group, University of Michigan Law School, and Washington University School of Law. I thank all the participants at these occasions. I also thank, in particular, Scott Altman, Ellen Aprill, Alan Auerbach, Reuven Avi-Yonah, Steven Bank, Pat Cain, Eric Claeys, Bill Gale, Jim Hines, Doug Kahn, Louis Kaplow, Bill Klein, Dan Klerman, Kyle Logue, Andrei Marmor, Herb Morris, Steve Munzer, Bob Pollak, Katie Pratt, Don Regan, Jonathan Schwartz, Daniel Shaviro, Seanna Shiffrin, Reed Shuldiner, Joel Slemrod, Kirk Stark, Nancy Staudt, Jeff Strnad, Eric Talley, David Weisbach, Peter Wiedenbeck, and Larry Zelenak for helpful comments and conversations. Tom Griffith deserves extra thanks for his detailed commentary on an early version. I also thank my research assistants Greg Barchie, Alex Baskin, Joan Huh, Mayer Nazarian, Keith Padien, and Christina Yang, and the always-superb University of Southern California law librarians for all their assistance. Finally, I owe at least an extra word for the late David Bradford, who gave me characteristically smart, provocative, and helpful comments on this work. David's grace and intellect, sorely needed in tax, will be deeply missed. Thank you, David. 807