Evolutionary Analysis of Tax Law: A Methodological Approach

Abstract

The present paper conceptualizes a methodology of an evolutionary tax law analysis from a critical rationalist perspective. This methodology has the following characteristics: We interpret tax rules as means to achieve tax goals. Means-end-statements have an ethical and an empirical dimension. The ethical dimension implies that tax goals and tax rules and their secondary effects must be compatible with the aims of market economy regulation. The empirical dimension includes the question if tax goals are realizable and if tax rules cause secondary effects. To answer this question, we need evolutionary hypotheses of tax effects. A quasi-nomological hypothesis regarding the evolutionary effects of taxation is as follows: "If taxation changes the rank order of the relevant decision-making options according to the actors' subjectively rational decision criteria, they decide differently if they take taxes into account than they would if they did not". From an evolutionary point of view, freedom of choice and equality before the law are the contributions of a market economy to the common good. In our opinion, equability of taxation is compatible with the market economy goals "freedom of choice" and "equality before the law". Equability of taxation, however, implies in principle decreasing such decision-making effects of taxation which reduce the explicit tax payment burden (in relative terms). These decision-making effects are designated here as tax avoidance decisions. We need the evolutionary tax effects framework mentioned above in order to develop tax rules which decrease such tax effects. By way of contrast, tax rules that induce or accept tax avoidance decisions conflict with equability of taxation. Such rules are sometimes driven by social goals. Thus, we have to analyze such rules from an evolutionary perspective with regard to their justification, feasibility and proportionality.

Is a One-book-system Adequate? A Framework for Tax Law Analysis Under Genuine Uncertainty

“…Therefore, tax avoidance decisions preliminarily indicate one or more unequitable tax rules. Table 1 summarizes the connection between tax avoidance decisions and tax equality from the taxpayers' perspective: Because of this connection, from our point of view, the hypothesis that taxation rules are equitable includes the hypothesis that these rules at least reduce tax avoidance decisions (Schmiel, 2013(Schmiel, , 2016a. Thus, tax effects hypotheses can support or challenge the legislative hypothesis of equitable taxation.…”

“…In sum, freedom of choice and equality before the law are fundamental requirements for a market system and therefore for a social order that coordinates interests via markets. Furthermore, freedom of choice and equality before the law are also social values (Schmiel, 2016a;Vanberg, 2011b) that the market system has to achieve.…”

“…For example, we have to expect that tax rules influence the actions of individuals and companies. For this reason, analyzing tax law needs empirical hypotheses, in particular action hypotheses and market hypotheses (Schmiel, 2016a).…”

Introduction to Brazilian Constitutional Tax Law System

“…For this reason, the substantiation of tax objectives first needs a clear idea of the aims that market economy regulation (and therefore also the tax system) is supposed to fulfill. The empirical dimension of meansend-statements results from the postulate that ought implies can as well as from the fact that it is necessary to recognize also the secondary effects of tax rules in order to analyze them in an ethical perspective" (Schmiel, 2016). Such statements are, in fact, very important, demonstrating that the tax system can't be understood, interpreted and applied alone, but, on the contrary, as part of economic regulation, even because taxes themselves influence economic activity and the way in which markets work, which demands an openness.…”

Monetary de-measurement of taxation using cogni-economic pressure coefficient on a continuous progressivity model: Towards equitable taxation for Kenya

“…What is lacking in this empirical claim is how wide the bands should be, whether or not a proportional tax component could be at the tail end of the progression, at what point if so, should the component be introduced, and what, if so, should the proportional tax be. Progressivity is argued to be function of the individual government's objectives, which will be reflected in taxation policy (Saez, et al, 2012) aligned to the evolutionary market economy goals (Schmiel, 2016). For example, in 1960s, the highest marginal income tax rate ranged about 91% in the United States.…”