Constitutional Tax Criteria

Abstract

In recent years, in many advanced Western countries, tax reform has become one of the most hotly debated issues in the area of political economy. Lively discussion and evaluation of the existing tax systems and country-specific proposals for tax reform abound. But, who is empowered to judge the necessity of tax reform, and according to what criteria? Traditional public finance based on welfare economics has implicitly assumed that government has perfect information and that it is a benevolent dictator. Accordingly, it is argued that government will correctly perceive the necessity of tax reform, basing its conclusion on exogenous traditional tax criteria.
From the public choice perspective, however, tax reform is regarded as a means by which governmental decision makers and others seek their own privateinterests, where suitable constitutional restrictions are lacking. Therefore, the realization of a tax reform proposal in the real world may result from the interaction of whole set of rent-seeking behavior of each actor.
The purpose of this paper is to explore what kinds of tax criteria individuals at the constitutional stage will choose to avoid becoming a victim of the tax system, which serves the private interests of government officials and/or various interest groups. This paper uses nearly the same constitutional framework as Brennan and Buchanan (1980) . In addition to their constitutional criterion of binding, I have logically derived new constitutional criteria on the basis of unanimous constitutional agreement among individuals, assuming the minimax behavioral hypothesis. These constitutional tax criteria suggest that it is important how individuals in advance artificially devise and institutionalize the constitutional choice setting for tax rules.