Percentage tax designation institutions. On Sugden’s contractarian account

Abstract

Abstract“Percentage Tax Designation Institutions”, also known as “Percentage Philanthropy Laws”, are fiscal institutions through which taxpayers can freely designate a certain percentage of their income tax to organizations whose main activity is of public interest: churches, third-sector organizations, political parties, etc. A comprehensive explanation of such systems is still lacking. In The Community of Advantage, Robert Sugden provides an original theoretical account of the Italian “8 × 1000” institution as one of those forms of regulation that “would be justified as ways of expanding opportunity for mutually beneficial transactions” and, more particularly, as a liberal and “contractarian approach to the provision of public goods”. This article is an attempt to expand and deepen the understanding not only of the 8 × 1000 but also of the 5 × 1000 and 2 × 1000 institutions, by reflecting on and possibly refining Sugden’s contractarian account, at least with regard to the part that relies on and develops the voluntary exchange tradition (Wicksell, Lindahl and Buchanan). To remain faithful to two normative premises of Sugden’s approach—the opportunity criterion and the correlated freedom of choice—we must introduce some theoretical adjustments to take into due account the way in which taxpayers’ freedoms—not only freedom of choice but also autonomy—are affected by default rules and the related redistribution procedures. In addition, these institutions also go beyond the voluntary exchange tradition—insofar as they go beyond its basic assumptions: the benefit principle of taxation, taxpayers’ self-interest and the very logic of exchange—and, at the same time, they can be read as a new form of voluntary tax justice.

Special Issue: “The Community of Advantage”

“…Guala argues that while Sugden's view could be enough to promote opportunities of mutual benefit in the market sphere, the social insurance system should be more extended to cover other important aspects of social life, such as growing inequalities, and to foster cooperative attitudes among its members. On a similar note, Paolo Silvestri's contribution (Silvestri 2021) seeks to expand upon Sugden's reflection on the Italian taxation law of 8 × 1000 as a contractarian approach to public goods. Silvestri makes an interesting case in applying Sugden's opportunity criterion to another case study, the Italian institution of 5 × 1000, claiming that Sugden's principles are more in accordance with this latter system, which broadens the opportunity of free choice of citizens.…”