As part of its summer workshop series, Ohio State’s Moritz College of Law invites junior scholars to present works-in-progress.  This summer, we had the pleasure of hosting both Daniel Hemel, an assistant professor at the University of Chicago Law School and Goldburn Maynard, an assistant professor at the University of Louisville Brandeis School of Law.  Both junior tax scholars are challenging the ways in which tax policy makers think about equity in the context of distributive justice.

Maynard, whose work-in-progress finds its intellectual genesis in Murphy & Nagel’s The Myth of Ownership and Reuven Avi-Yonah’s “The Three Goals of Taxation,” focused on the prominence of everyday libertarianism in tax litigation and policy making.  Tax’s redistributive function, he asserted, should be tethered to equality rather than to economic liberty or to efficiency.  While acknowledging that “equality,” could mean different things to different people, Maynard concentrated on equality of income or wealth, rather than on more difficult-to-quantify forms, such as equality of opportunity. Although he did not explicitly raise it, Maynard seems also to be contemplating an eventual challenge to the sufficiency of vertical equity as a measuring stick in tax policy.  At this point, though, his goal is primarily to widen the discussion.

Hemel, too, is thinking of distributive justice in broader terms.  Using the home mortgage interest deduction as a case study, Hemel and Kyle Rozema, a postdoctoral fellow at the Northwestern-Pritzker School of Law, argue that labeling a tax provision as “progressive” or “regressive” should not be done in isolation.  Instead, scholars and policy makers should look both at the operation of a provision within the context of the Code and at the reallocation of revenue generated by a provision’s amendment or repeal.

For example, households in the top 1% of the income distribution tend to benefit more from the mortgage interest deduction than households in the bottom 99%. On the other hand, the presence of the deduction in the Code counter-intuitively causes the top 1% to bear a larger share of the total tax burden than they otherwise would.   In other words, Hemel and Rozema assert that while the deduction looks regressive when viewed in isolation, it actually increases progressivity overall in the Code.  (This, of course, is a function of what percentage of a taxpayer’s income is devoted to mortgage interest in a skewed income distribution, so the result might be different if Hemel and Rozema dug deeper into the distribution rather than focusing on the top.)  Regardless, Hemel and Rozema seem to be proving Maynard’s implicit point that traditionally “equitable” policies do not necessarily promote equality of income or wealth.

Perhaps more interesting is Hemel and Rozema’s argument that the progressivity or regressivity of an amendment to the Code cannot be determined without also considering Congress’s use of the resulting revenue.  For example, if Congress were to repeal the mortgage interest deduction and write equal-sized checks to each household, the distributional consequences would be more progressive than if additional revenue were used to reduce all taxpayers’ liabilities proportionately.  Here, Hemel and Rozema’s argument brings to mind earlier work by Lily Batchelder and others on the use of refundable credits versus non-refundable credits or deductions.  And notably, like Maynard’s work in progress, Hemel and Rozema’s work is pushing policy makers to look deeper into equity, questioning stock assumptions and asking how the concept can be made meaningful in practice and not just on paper.

That the traditional tax policy cannon (if there is such a thing) would breed restiveness in junior scholars at a time of political and class unrest should come as no surprise.  Maynard’s assertion that equality has separate meaning and import, and Hemel’s and Rozema’s argument that tax analysis is only half of the picture push tax policy scholarship in a direction that is more pragmatic, building a bridge of sorts between what students of tax policy learn and what is happening in government.  It will be interesting to see what the future holds both for these young scholars and for the world of tax policy more generally.

@ProfHoffer