FOUR PRINCIPLES OF OPTIMAL TAX SYSTEM DESIGN

Although optimal tax theory dominates both tax economics (1) and tax law scholarship (2) in the upper academic ranks, legal academics make remarkably little use of it in their day-to-day work. There are at least three reasons for this. First, the mathematics required to understand optimal tax theory are beyond the comfort level of most legal scholars. (3) Second, optimal tax theorists commonly base their normative claims in formulaic welfare maximization. (4) Many in the legal academy are unwilling to abandon more widely held theories of the good. (5) The electorate, after all, has yet to internalize Mirrlees's or Ramsey's equations. Third and perhaps most importantly, until recently even the most dedicated optimal tax theorists have viewed the theory as having relatively limited practical scope, relating primarily to rate structure and base definition at a high conceptual level. (6)