The author would like to thank Steve Bank, Victor Fleischer, Bill Klein, Ed McCaffery, Steve Munzer, Seana Shiffrin, Noah Zatz, and Eric Zolt for their helpful comments on an earlier draft of this article. In addition, Nicole Gambino deserves thanks for her valuable research assistance.

1. The Beachcomber (1962), online: The Beachcomber Episode Guide, Version 2.0 (October 2004) http://www.geocities.com/TelevisionCity/Stage/2950/Adventure/Beachcomber.htm.

2. Put differently, these taxes are not “choice-sensitive.” See Shaviro, Dan, “Endowment and Inequality” in Thorndike, Joseph J. & Ventry, Dennis J. Jr., eds., Tax Justice: The Ongoing Debate (Washington, D.C.: Urban Institute Press, 2002) at 141 Google Scholar (describing the liberal egalitarian “choices thesis” and quoting Murphy, Liam, “Liberty, Equality, Well-Being: Rakowski on Wealth Transfer Taxation” (1996) 51 Tax L. Rev. 473 at 474Google Scholar: “the distinction between wealth or income people have acquired through their own ‘effort or voluntary choices’ and wealth or income obtained ‘purely by chance’ is of foundational importance to distributive justice.”). See also Shiffrin, Seana, “Egalitarianism, Choice-Sensitivity and Accommodation” in Pettit, P. et al., eds., Reason and Value: Themes from the Work of Joseph Raz (Oxford: Oxford University Press, 2004)Google Scholar (“[T]here is a surprising degree of consensus that a fair distribution of resources would require individuals to internalize the costs of their voluntary choices.”).

3. Episode 2 (February 27, 1962) of The Beachcomber, The Shark Affair, supra note 1Google ScholarPubMed.

4. Rawls, John, Justice as Fairness (Cambridge, MA: Harvard University Press, 2001) at 158.Google Scholar

5. Nozick, Robert, Anarchy, State and Utopia (New York: Basic Books, 1974) at 169.Google Scholar

6. Ibid. at ix.

7. Murphy, Liam & Nagel, Thomas, The Myth of Ownership: Taxes and Justice (Oxford: Oxford University Press, 2002) at 123 CrossRefGoogle Scholar (emphasis added).

8. Rawls, John, “Some Reasons for the Maximin Criterion” (1974) 64 Am. Econ. Rev. 141 at 145 Google Scholar. Rawls’s exact preferences for the tax system are the subject of some debate. He did not write extensively on the subject, but in various passages he did ex Press certain preferences. See Rawls, , A Theory of Justice, rev. ed. (Cambridge, MA: Harvard University Press, 1999) at 246–47 Google Scholar in which he endorses a flat-rate consumption tax. For a discussion of Rawls’s views on taxation, see McCaffery, Ed, “The Uneasy Case for Wealth Transfer Taxation” (1994) 104 Yale L.J. 283 at 291-93CrossRefGoogle Scholar and Sugin, Linda, “What Rawls Demands of Tax Systems” (2004) 72 Fordham L. Rev. 1991Google Scholar.

9. See Fisher, Glenn W., The worst tax?: a history of the property tax in America (Lawrence: University Press of Kansas, 1996) at 13.Google Scholar

10. Seligman, Edwin R. A., “Progressive Taxation in Theory and Practice” (Paper presented to the 20th American Economic Association Meeting, 1907) (Princeton, NJ: American Economic Association, 1908) at 205.Google Scholar For a discussion of faculty taxes as a precursor to state income taxes, see Bank, Steven A., “Origins of a Flat Tax” (1996) 73 Den. U. L. Rev. 329 at 341–42 Google Scholar.

11. Millis, H.A., “Business and Professional Taxes as Sources of Local Revenue” (1908)16 J. Pol. Econ. 76 at 83-85CrossRefGoogle Scholar. See also Rabushka, Alvin, “The Colonial Roots of American Taxation, 1607-1700” (2002) 114 Policy Rev. 61 at 69Google Scholar (“The text of the Massachusetts law stipulates that artificers who were paid 18d. per day in the summer should pay 3s. 4d. a year in faculty tax…”).

12. Shaviro, Dan, “Inequality, Wealth and Endowment” (2000) 53 Tax L. Rev. 397 Google Scholar; see Shaviro, supra note 2. Hasen, David, “Political Theories of Personal Endowment Taxation” (2003) [unpublished paper on file with author]Google Scholar.

13. Presumably those who exercise their endowment would not be taxed again on their wages. Thus, an endowment tax may be viewed as consisting of two separate taxes: a tax on wages (i.e., “realized” endowment) and a tax on “unrealized” or “untapped” endowment. Taxes on wages and other forms of realized endowment are of course familiar and uncontroversial. It is the tax on unrealized endowment that commentators typically find objectionable.

14. Shaviro’s first essay, supra note 12, published in 2000, is actually a reply to Eric Rakowski’s lengthy article on wealth taxes (see Rakowski, Eric, “Can Wealth Taxes Be Justified?” (2000) 53 Tax L. Rev. 263Google Scholar. The second article (2002) is a revised version of the first and appears as a chapter in the book Tax Justice: An Ongoing Debate, supra note 2. For ease of exposition, I will refer only to the article published in 2002.

15. Shaviro (2002), supra note 2 at 135.

16. Ibid. at 136.

17. Warren, Alvin, “Would a Consumption Tax be Fairer than an Income Tax?” (1980) 89 Yale L.J. 1081 at 1092CrossRefGoogle Scholar.

18. Andrews, William, “A Consumption-Type or Cash-Flow Personal Income Tax” (1974) 87 Harv. L. Rev. 1113 at 1167CrossRefGoogle Scholar.

19. Ibid. Warren goes on to explain the basis for society’s interest in the distribution of income. He suggests that producers of income may not have a “controlling moral claim” to that income if they come into it through “fortuity” or “interrelationships of contemporary society.” However, these factors only suggest that the pre-tax distribution of income should not be considered presumptively legitimate; they say nothing about what the distribution of income should be.

20. Shaviro (2002), supra note 2 at 123.

21. Ibid. See also Arneson, Richard, “Egalitarianism and the Undeserving Poor” (1997) 5 J. Pol. Phil. 327 at 345CrossRefGoogle Scholar (“If well-being to a first-approximation is flourishing in a way of life that is choice-worthy in the sense that it could withstand informed deliberative scrutiny, then income is at best only a very rough proxy of well-being.”).

22. Ibid. at 125.

23. Or, to use Dworkin’s terminology, an endowment tax is both “ambition-sensitive” and “endowment-insensitive.” Dworkin, Ronald, Sovereign Virtue: The Theory and Practice of Equality (Cambridge, MA: Harvard University Press, 2000) at 89.Google Scholar That is, an endowment tax permits “those who choose to invest rather than consume, or to consume less expensively rather than more, or to work in more rather than less profitable ways … to retain the gains that flow from these decisions.” At the same time, however, an endowment tax works to minimize the influence on the distribution of resources of “differences in ability of the sort that produce income differences in a laissez-faire economy among people with the same ambitions.” Ibid.

24. Bradford, David, Untangling the Income Tax (Cambridge, MA: Harvard University Press,1986) at 155.CrossRefGoogle Scholar

25. Ibid

26. Ibid at 155-56.

27. One might argue that consumption—or at least excessive consumption—has negative externalities insofar as it encourages others to consume more than they would otherwise choose to consume. This argument has been suggested by economist Robert Frank. See Frank, Robert H., Luxury Fever: why money fails to satisfy in an era of excess (New York: Free Press, 1999)Google Scholar. See also McCaffery, Edward J., “The Tyranny of Money” (2000) 98 Mich. L. Rev. 2126 CrossRefGoogle Scholar.

28. Put differently, conventional tax bases fail to account for the benefits of not making full use of one’s earning capacity. For example, someone who works part-time, for example, will enjoy more leisure (or more time with family, savings on household help, etc. …) than someone who works full-time. Similarly, an individual who accepts a job paying only a portion of her wage-rate may experience more enjoyment or fulfillment from that position than someone who takes a position at 100% of his wage-rate.

29. Eric Rakowski argues against wealth taxes insofar as wealth differences “originat[e] in people’s choices to labor and save at different times and in different ways.” See Rakowski, supra note 14 at 285.

30. Indeed, John Lackland himself provides evidence for this proposition. See Episode 1 of The Beachcomber (“According to Amura’s stuffy commissioner Andrew Crippen, a visitor must maintain a bank balance of 150 pounds. This puts Lackland in an embarrassing position—his balance is almost nil.”).

31. Of course it is still possible that tax revenues may be spent in a manner that results in redistribution between the two taxpayers. That issue is set aside. We can assume, for example, that tax revenues are to be spent on some pure public good with respect to which each taxpayer-citizen benefits equally. The point here is simply that a properly structured endowment tax would not itself redistribute among individuals with equal levels of endowment.

32. See discussion in Shaviro (2002), supra note 2 at 136-40.

33. This is the basic starting point of the optimal income tax literature. See generally, Mirrlees, J.A., “An Exploration in the Theory of Optimum Income Taxation” (1971) 38 Rev. Econ. Stud. 175 CrossRefGoogle Scholar. For a useful overview, see Rosen, Harvey, “Income Tax Progressivity: A Century-Old Debate” (Jan/Feb, 1990) Business Rev. 3Google Scholar.

34. There would still be an “income effect” from the tax but no “substitution” effect. Note, however, that if the endowment tax is based on earnings capacity as determined by one’s level of education, then there will be a substitution effect insofar as individuals pursue less education.

35. See, e.g., Bankman, Joseph & Griffith, Thomas, “Social Welfare and the Rate Structure: A New Look at Progressive Taxation” (1987) 75 Cal. L. Rev. 1905 CrossRefGoogle Scholar.

36. Shaviro (2002), supra note 2 at 137-38. Note that to do this one must make interpersonal comparisons of utility.

37. The problem is exacerbated once we introduce “lumpy” labor market conditions, in which entering the workforce takes place on an “all or nothing” basis. For a discussion of this effect in the context of labor market decisions of secondary earners, see McCaffery, Edward J., “Taxation and the Family: A Fresh Look at Behavioral Gender Bias in the Code” (1993) 40 UCLA L. Rev. 983 at 1019Google Scholar.

38. Note, however, that if endowment taxes could somehow be paid in the form of “endowment” (i.e., by somehow transferring talent or ability from one individual to another), then the beachcomber could satisfy his tax liability without implicating his distaste for labor. Relatedly, Shaviro asks us to consider a hypothetical world in which corporate lawyers are paid in yogurt that will spoil within five minutes unless eaten, while the endowment of beachcombers is easily transferable from one person to another. The point here is to emphasize that our reluctance to embrace endowment taxes may be attributable to “mere” technology. Ibid. at 134.

39. For an extension and critique of the welfarist view on endowment taxes, see Dominik Skelenar, “Horizontal Equity in Taxation” (2003) [unpublished paper on file with author].

40. See discussion in Shaviro (2002), supra note 2 at 140-43.

41. Note that in addition, Principle 1 (the liberty principle) has “lexical priority” over Principle 2, with the result that liberty can only be restricted for the sake of liberty (and not for any other value). See discussion infra note 47.

42. For a useful overview of liberal egalitarian theories of justice, see Kymlicka, Will, Contemporary Political Philosophy: An Introduction (Oxford: Clarendon Press, 1990) at 50–94 Google Scholar.

43. Alexander, Larry & Schwarzschild, Maimon, “Liberalism, Neutrality, and Equality of Welfare vs. Equality of Resources” (1987) 16 Phil. & Pub. Affairs 85 Google Scholar. According to Will Kymlicka, Rawls endorses “a state which does not justify its actions on the basis of the intrinsic superiority or inferiority of conceptions of the good life, and which does not deliberately attempt to influence people’s judgments of the value of these different conceptions.” See also Will Kymlicka, supra note 42 at 205.

44. But see Raz, Joseph, The Morality of Freedom (Oxford: Clarendon Press, 1986)Google Scholar. For a useful summary of Raz’s views on liberal neutrality, see Kymlicka, Will, “Liberal Individualism and Liberal Neutrality” (1989) 99 Ethics 883 CrossRefGoogle Scholar.

45. Shaviro (2002), supra note 2 at 142. See also Kaplow, Louis, “Human Capital under an Ideal Income Tax” (1994) 80 Va. L. Rev. 1477 at 1506 n. 71CrossRefGoogle Scholar (noting that “an ability tax, if feasible, follows from … Rawlsian or other starting points that are concerned substantially with individual welfare.”).

46. See Rawls, supra note 4 at 158.

47. Ibid. at 42-43.

48. Ibid. at 43.

49. See, e.g., Murphy & Nagel, supra note 7 at 122 (“endowment taxation would effectively force work on those who could otherwise survive without wage earnings and likewise force many people who would prefer a lower-paying position into careers that they have no interest in.”).

50. Rakowski, supra note 14 at 267n.10.

51. Kelman, Mark G., ‘Personal Deductions Revisited: Why They Fit Poorly in an “Ideal” Income Tax and Why They Fit Worse in a Far from Ideal World’ (1979) 31 Stan. L. Rev. 831 at 842.Google Scholar

52. Ibid.

53. See Robert Nozick, supra note 5 at 169.

54. Ibid.

55. Ibid. at 172.

56. Ibid. at ix.

57. See, e.g., Feser, Edward, “Taxation, Forced Labor and Theft” (2000) 5 The Independent Rev. 219 Google Scholar (concluding that Nozick’s argument shows “taxation as such to be fundamentally morally illegitimate”); see also Epstein, Richard, “Taxation, Regulation and Confiscation” (1982) 20 Osgoode Hall L.J. 433 at 453Google Scholar (“it is quite clear that … all forms of … taxation are subtle forms of the taking of private property.”). But see Kearl, J.R., “Do Entitlements Imply that Taxation is Theft?” (1977) 7 Phil. & Pub. Affairs 74 Google Scholar; Abramson, Elliott M., “Philosophization Against Taxation: Why Nozick’s Challenge Fails” (1981) 23 Arizona L. Rev. 753 Google Scholar.

58. For example, consider the DC-based Tax Foundation’s celebration of so-called “Tax Freedom Day”, i.e., the day on which, if the government took one hundred percent of your paycheck starting on January 1, you’d stop paying taxes and keep your earnings to yourself. See Stark, Kirk J., “The Right to Vote on Taxes” (2001) 96 Nw. U. L. Rev. 191 at 212.Google Scholar

59. To date this question seems to have received only limited attention in the literature. For example, Shaviro offers a partial reply to the liberty-based objections to endowment taxation, but he neither develops the argument in full nor explores its relationship to Nozick’s claim. In response to Kelman’s argument that endowment taxes should be rejected on “simple libertarian principles,” Shaviro simply asks rhetorically, “what motivates this particular use of the “simple libertarian principle?” Noting that Kelman does not normally endorse libertarian positions, Shaviro asks “Why use it in one place and not in the other? Shaviro (2002), supra note 2 at 133. Similarly, in a lengthy footnote that touches on this issue, Louis Kaplow simply notes that the liberty objec tions to endowment taxes “are much less plausible than many commentators suggest” and that “there is no clear justification for the view that individuals are entitled to 100% of the fruits of their time when they use it outside the marketplace….” Kaplow (1994), supra note 45 at 1506-07 n. 71. Finally, Richard Musgrave ex Presses a similar skepticism in his assessment of Rawls’s argument that endowment taxes would unduly interfere with liberty. See Musgrave, Richard, “Maximin, Uncertainty, and the Leisure Trade-Off” (1974) 88 Q. J. Econ. 625 at 632.CrossRefGoogle Scholar

60. Murphy & Nagel, supra note 7 at 122-23. 61. Ibid

62. Ibid. (emphasis added).

63. Ibid. at 123. One might question Murphy and Nagel’s use of a “trained corporate lawyer” in their hypothetical. A pure endowment tax should arguably be concerned only with differences in native endowments—talents and abilities that individuals came into by arbitrary luck, such as being born into a successful family—and not endowments developed through one’s own efforts.

64. It is assumed here that the sculptor can earn the same wage-rate when working at only 20% of his capacity. If labor markets are “lumpy” and a particular wage rate can only be achieved by working full-time, then the analysis may be different. The existence of lumpy labor markets suggests that individuals may have multiple wage rates depending on the extent of their involvement in the labor market. If it were feasible to measure personal endowment, one might imagine an endowment tax based on “part-time wage rates” rather than “full-time wage rates” as a means of addressing the lumpy labor markets problem.

65. One way to distinguish the two cases is to argue that non-market activity is somehow more “noble” or “praiseworthy” than market activities. None of the commentators who object to endowment taxation on liberty grounds have made precisely this argument. Kelman comes the closest to this view when he cites the beachcomber’s preference not to enter the labor market as evidence of a “desirable anticapitalist strain in a market-obsessed culture.” Kelman, supra note 51 at 880. Shaviro asks in reply: “Why should we think that people who eschew trades are somehow nobler, happier, or, for that matter, less-calculating optimizers than those who decide that a trade has something to offer them?” See Shaviro (2002), supra note 2 at 133.

66. John Rawls (1974), supra note 8 at 145 (emphasis added).

67. Kelman, supra note 51 at 842. See also McCaffery, Edward J., “Must We Have a Right to Waste?” in Munzer, Stephen R., ed., New Essays in the Legal and Political Theory of Property (Cambridge: Cambridge University Press, 2001) at 24 Google Scholar (‘[O]nce an individual has exercised her talents in a social market, and has received money or some other carrier of social value in recompense, it is within the legitimate powers of society to determine what it is she can or cannot do with her property or, equivalently, what of the material is “her” property in the first instance.’).

68. Kelman, supra note 51 at 880 (“I believe that once people deliberately exercise their earning power in the market, the tax system should measure their relative positions as a prelude to redistribution.”).

69. See also Alvin Warren, supra note 17 at 1120 (“As compared with a tax on personal earning capacity, both the consumption tax and income taxes are concerned with what an individual chooses to do, rather than with what he might do. Accordingly, it can be argued that both are preferable to a tax levied on capacity because they interfere less with personal choice and liberty.”).

70. For a summary of arguments typically offered in support of the libertarian principle of “taxpayer consent,” see Stark, supra note 58 at 210-16.

71. Lovett, Frank, “Can Justice Be Based on Consent?” (2004) 12 J. Pol. Phil. 79 at 88Google Scholar (noting that ‘[f]or Rawls, the appropriate conditions for securing consent are given in the specification of the “original position.”‘).

72. Hayek, Friedrich A., The Constitution of Liberty (Chicago: University of Chicago Press, 1960)Google Scholar; Gauthier, David, Morals by Agreement (Oxford: Oxford University Press, 1986)Google Scholar; Hobbes, Thomas, Leviathan (1651) (New York: Cambridge University Press, 1991)Google Scholar; see also Groves, Harold M., Tax Philosophers: Two Hundred Years of Thought in Great Britain and the United States (Madison: University of Wisconsin Press, 1974) at 29 Google Scholar; Murphy & Nagel, supra note 7 at 16-19.

73. See Musgrave, Richard & Musgrave, Peggy, Public Finance in Theory and Practice, 5th ed. (New York: McGraw-Hill Book Co., 1989) at 220 Google Scholar (“Under a strict regime of benefit taxation, each taxpayer would be taxed in line with his or her demand for public services.”).

74. Byrne, Steven E., “A Rawlsian Argument for Basic Income” (M.A. thesis, University College, Dublin, 1993) [unpublished paper on file with author]Google Scholar.

75. Rawls, John, Political Liberalism (New York: Columbia University Press, 1993) at 181 Google Scholar (listing primary goods to include “free choice of occupation against a background of diverse opportunities”). See also Rawls, ibid. at 308 (explaining that “these opportunities allow the pursuit of diverse final ends and give effect to a decision to revise and change them, if we so desire.”).

76. Ibid at 228.

77. Murphy & Nagel, supra note 7 at 123.

78. Kaplow, supra note 59 at 1506-07 n.71.

79. For an explanation, see “Property Tax Circuit Breakers, Institute on Taxation and Economic Policy”, Policy Brief #10 (May 2004), online: Institute on Taxation and Economic Policy http://www.itepnet.org/pb10cb.pdf.

80. Rawls himself offers virtually no guidance on this point, perhaps because he simply takes the idea to be self-evident.

81. Kelman, supra note 51 at 842.

82. The argument here has some parallels to the problem of “expensive tastes” familiar in the literature on egalitarian theories of distributive justice. Expensive tastes are a problem for so-called “welfare egalitarians”—i.e., those who believe that the currency of distributive justice should be welfare. The question is whether individuals with expensive tastes should be entitled to a larger share of resources in order to compensate them for those tastes. For a discussion of the “expensive tastes” problem, see Dworkin, Sovereign Virtue, supra note 23 at 48-59. See also Cohen, G.A., “On the Currency of Egalitarian Justice” (1989) 99 Ethics 906 CrossRefGoogle Scholar; Keller, Simon, “Expensive Tastes and Distributive Justice” (2002) 28 Soc. Theory & Practice 529 CrossRefGoogle Scholar.

83. Kelman, supra note 51 at 842.

84. See Rosen, Harvey S., Public Finance, 6th ed. (Homewood, IL: R.D. Irwin, 2002) at 374–77.Google Scholar

85. Shaviro (2002), supra note 12. See also Ed McCaffery, Taxing Women (Chicago: University of Chicago Press 1997).

86. Arneson, supra note 21 at 345-47.

87. As Arneson notes, a “talented mendicant friar may report a small income, but be leading exactly the life that he most wishes to lead….” Ibid. at 345.

88. Rawls, supra note 4 at 179.

89. Internal Revenue Code I.R.C. § 32 (2004).

90. U.S., Department of the Treasury Internal Revenue Service, Earned Income Tax Credit (Publication 596) (2004) at 44 (tables).

91. For a discussion, see Ventry, Dennis J. Jr., “The Collision of Tax and Welfare Politics: The Political History of the Earned Income Tax Credit, 1969-1999” (2000) 53 Nat’l Tax J. 983 at 1026.CrossRefGoogle Scholar

92. Murphy & Nagel, supra note 7 at 123 (“the value of autonomy should lead us to prefer a set of institutions that limits the range of choices as little as possible, by comparison to other feasible sets of actual institutions.”).