Tax Ethics

Tax ethics concern the values, practices, and consequences of taxation as a means of distributing the benefits and burdens of citizenship, including evaluation of the conduct of taxpayers and their accountants and financial advisers in determining and taking responsibility for their fair share of the tax burden. The moral framework for evaluating taxation considers both ends and means in the apportioned tax burden, an accounting of the economic distortions caused by taxation itself, and an assessment of the impact on the economy of public goods and services, their impact on the larger economy, and their impact on social equity. Ethical concerns about taxation center on the proper integration of competing claims: social justice, individual freedom, economic productivity, and efficiency applied to the tax system itself as well as to the instrumental value of taxation in achieving broad social policy goals. Ethical concerns about individual responsibility concern the willingness of taxpayers and tax practitioners to discern and honor the moral claims and financial obligations of citizenship.

In democratic societies, tax ethics are often viewed in terms of simple justice: What is fair? The modern democratic view of tax equity is viewed progressively: Taxpayers of equal means should bear an equal tax burden, and taxpayers of unequal means should bear a proportionally unequal tax burden. The consideration of what is fair taxation and the development of the progressive theory of tax equity has a long history that is still in the making. In recent years, a “postprogressive” approach to taxation has developed with a focus on the role of taxation in economic growth and productivity as a means of achieving social and economic justice. During that time there has been an increased use of tax mechanisms, such as taxes and surtaxes on utilities, travel, alcohol, and tobacco, that shift the tax burden away from income toward consumption.