The Right to Autonomy as a Moral Foundation for the Realization Principle in Income Taxation

Abstract

This chapter supplements the debate on the ideal capital gains tax through its examination of a suitable technique for assessing income. On the one hand, assets can be taxed according to the annual increase in market value (the mark-to-market approach). On the other hand, the taxation of capital can be imposed on the income that one realizes from one’ s assets-such as the monetary benefits received in exchange for a transfer of property (the realization approach). Importantly, tax scholars quasi-unanimously decry the former practice in terms of equity and efficiency. Theoretically, the (diminishing) acceptance of the taxation of realized gains is merely founded on pragmatic concerns. By delivering a deontological defense of the realization principle, this chapter establishes a possible normative foundation for this theoretically denounced practice, and supplements the debate on tax reform by suggesting the promotion of efficiency or financial redistribution in an autonomy-friendly fashion.