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Rawls, Taxation and Calabresi & Melamed’s Rules

Author

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  • Riza Limor

    (School of Law, Ono Academic College, Kiryat Ono, Israel)

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.

Suggested Citation

  • Riza Limor, 2019. "Rawls, Taxation and Calabresi & Melamed’s Rules," Review of Law & Economics, De Gruyter, vol. 15(3), pages 1-26, November.
  • Handle: RePEc:bpj:rlecon:v:15:y:2019:i:3:p:26:n:1
    DOI: 10.1515/rle-2016-0073
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    References listed on IDEAS

    as
    1. Kaplow, Louis & Shavell, Steven, 1994. "Why the Legal System Is Less Efficient Than the Income Tax in Redistributing Income," The Journal of Legal Studies, University of Chicago Press, vol. 23(2), pages 667-681, June.
    2. Kaplow, Louis & Shavell, Steven, 2000. "Should Legal Rules Favor the Poor? Clarifying the Role of Legal Rules and the Income Tax in Redistributing Income," The Journal of Legal Studies, University of Chicago Press, vol. 29(2), pages 821-835, June.
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    5. Shavell, Steven, 1981. "A Note on Efficiency vs. Distributional Equity in Legal Rulemaking: Should Distributional Equity Matter Given Optimal Income Taxation?," American Economic Review, American Economic Association, vol. 71(2), pages 414-418, May.
    6. A. Mitchell Polinsky, 1980. "Resolving Nuisance Disputes: The Simple Economics of Injunctive and Damage Remedies," NBER Working Papers 0463, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    property rule; liability rule; inalienability rule; Calabresi and Melamed; pliability rule; taxation; John Rawls; least advantaged; social welfare; distributive justice;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • K34 - Law and Economics - - Other Substantive Areas of Law - - - Tax Law

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