PREDISTRIBUTION AGAINST RENT-SEEKING: THE BENEFIT PRINCIPLE’S ALTERNATIVE TO REDISTRIBUTIVE TAXATION

Abstract

Abstract The distributive justice literature has recently formulated several tax proposals, with limitarians or property-owning democrats proposing new or higher taxes on wealth or capital income intended to decrease the growing wealth gap. This essay joins this debate on inequality and redistributive taxation through the lens of the “benefit principle for public policy.” This principle says that specific rules and institutions are acceptable to the extent that they create benefits for all individuals in society, or at least don’t make anyone worse off. This benefit principle opposes wealth accumulation to the extent that wealth was generated through rent-seeking—that is, income unrelated to economic productivity, which is not embedded in mutually beneficial exchanges. I maintain, however, that ruling out rent-seeking requires not ex post taxation, but primarily a more “predistributive corrective policy,” that is, reconfiguration of market institutions to prevent wealth accumulation through rent-seeking in the first place. The alternative response is, thus, not to tackle inequality as such but to reform the market to promote the occurrence of mutually beneficial exchange.