Thursday, September 09, 2010

Hart, Fuller, and the Legitimacy of Taxes

-- Posted by Neil H. Buchanan

This past Friday, I sat in on a guest presentation in Cornell Law Professor Robert Summers's jurisprudence seminar. Dr. Kristen Rundle, a rising star in the Department of Law at the London School of Economics and Political Science, described some of her ongoing research on the work of the late Professor Lon Fuller and his famed debated with Professor H.L.A. Hart. Like everyone who has gone to law school in the last half-century, I had heard of that debate; but also like nearly everyone who has not gone on to become a professor of jurisprudence, I had never thought too much more about it, after coming across it on a syllabus in a 1L course. Dr. Rundle's presentation, however, was not only fascinating on its own but demonstrated that the Hart-Fuller debate is relevant to literally every area of the law. In my case, that means that it is relevant to tax law.

Fuller took the position that the legitimacy of law is based on eight "principles of legality." The law must be: "(1) sufficiently general; (2) publicly promulgated; (3) sufficiently prospective; (4) clear and intelligible; (5) free of contradiction; (6) sufficiently constant through time so that individuals can order their behavior accordingly; (7) not impossible to comply with; and (8) administered in a way sufficiently congruent with their wording so that individuals can abide by them." Fuller's fundamental point is that these principles, if followed, will form the basis for a legal system that is morally defensible. That is, a legal system should not be based only on the raw power of the political system that backs up that legal system. Instead, the legal system has independent moral significance if it reflects Fuller's principles.

Scholars are apparently united in concluding that Hart definitively defeated Fuller in their debate. Hart argued that Fuller's principles are not the underpinning of a morally significant legal system but are, instead, nothing more (nor less) than a road map to building an effective legal system (with no particular moral significance). Thus, for example, the Nazi regime's departures from Fuller's principles were not what made that regime immoral. One could, presumably, imagine a completely immoral regime that is "sufficiently general," "intelligible," "sufficiently constant through time," and so on that it could meet Fuller's criteria and work quite well as a legal system.

Dr. Rundle took the position that Fuller could have won the debate. That is, having studied his writings in their totality, she argued that Fuller had (at various times) made all of the arguments necessary to defeat Hart's attacks; but Fuller for some reason did not marshal all of those arguments effectively during the debate. She described how the Nazi example was a particularly strong one for Fuller's position, precisely because the Nazi's most morally horrendous acts were promulgated and carried out in ways that violated Fuller's maxims. When the Nazis wanted to do something morally unobjectionable, in other words, they would follow Fuller's maxims. When they did something ugly, they wrote the rules in secret and enforced them at the end of the barrel of a machine gun.

I suspect that Dr. Rundle's scholarship is an important contribution to the body of scholarship on the Hart-Fuller debate, and that other jurisprudence scholars will find her arguments both interesting and difficult to defeat. On the other hand, I am a tax policy scholar; so my prediction that jurisprudence scholars might be interested in anything is a bit like a rock-n-roll critic predicting that a new opera will be all the rage in Vienna. (Yes, in this analogy, tax policy is rock-n-roll. My analogy, my rules.) Even if I am wrong in that prediction, however, I found Dr. Rundle's arguments especially helpful in grappling with one of the problems that I (and, I suspect, all tax professors) confront when teaching the basic tax law class: What makes taxes legitimate?

Of course, the U.S. tax system seems clearly to violate at least one of Fuller's principles, to wit, that it be "clear and intelligible." Other items on the list (sufficient constancy over time, possible to comply with, etc.) would also draw guffaws from many critics of the U.S. tax system. As Dr. Rundle emphasized to me after her talk, however, Fuller's maxims are not a checklist (that is, they are guidelines for legitimacy, not a cookbook), and more importantly, they must be understood in the context of the problem that a legal system confronts. Because the tax system by necessity must be relevant to a nation's economic system, a more complicated economy will require a more complicated tax system. Just because there are a lot of pages in a legal rulebook does not mean that the system has lost its legitimacy. (As another example, I would add that the occasional imposition of taxes retroactively -- as might well happen this year in the U.S., if there is a "fix" of the temporarily-lapsed estate tax -- does not violate the maxim that the system be "sufficiently prospective." Such laws are passed retroactively to protect the legitimacy of the system, not undermine it, because to do otherwise would allow savvy players to game the system during the process of passing the law.)

From the standpoint of the Hart-Fuller debate, even Hart's position is helpful to understanding debates over tax laws. In Hart's view, following Fuller's suggestions would at least tend to support the public's compliance with the tax system. "Tax morale," as it is sometimes called, describes the public's belief that it is a good idea to comply with taxes. If people come to believe that the tax system is illegitimate, they reduce their compliance, which makes it more administratively difficult (and expensive) to administer the system. In places where "only chumps pay taxes," in other words, the system of tax law has lost its efficacy. Governments would thus be wise to follow Fuller's principles, simply to keep the system running as smoothly as possible.

I suspect, however, that tax law is also subject to Fuller's larger point, that a tax system that complies with his principles is not merely a more effective legal system but a more moral one as well. As a tax system becomes arbitrary and less predictable, after all, the public's reaction of disgust is not merely a matter of feeling frustration at the difficulty of understanding how to pay one's taxes. The public's reduced compliance is, in other words, more than a matter of higher "transactions costs." It is a matter of having lost confidence in the government's willingness and ability to set up a system that need not be hidden behind closed doors nor arbitrarily changed at the whim of a functionary.

The debate over the tax system in the U.S. and elsewhere, therefore, is based on Fuller's views, not just Hart's more restrictive views. The U.S., for example, has a much higher rate of tax compliance than one would predict based merely on individuals' strategic sense of risks and rewards of tax evasion. Part of what we are debating when we argue about tax laws is whether the system works well and can be made to work better, by a variety of instrumental criteria. Part of the debate, as well, is about the underlying moral significance of taxing income versus property, graduated rates versus constant rates, and so on. The rest of the debate, however, is about Fuller's concept of legal morality. People will more readily comply with a system that is moral, because they feel that it is right to do so, not just because they are afraid not to do so.