Libertarianism and the Charitable Tax Subsidies

INTRODUCTIONAlthough many Americans claim to subscribe to libertarian theories of justice, tax scholarship is largely silent about the interaction between libertarian principles and the structure of our tax system.1 This is not surprising, for what springs to mind when one hears the word "libertarianism" is Robert Nozick's argument that taxation is slavery.2 If all taxation is indeed slavery, why bother analyzing libertarian principles for insights into our tax system? This dismissal, however, ignores the diversity of libertarian thought.3 To that end, this Article mines the nuances of libertarian theory for insights into one feature of our tax system: the charitable tax subsidies.Exploring the nuances of libertarian theory yields some surprising results. Some strands of libertarian thought suggest that the charitable tax subsidies are in and of themselves illegitimate. These strands of libertarianism forbid not only redistribution but also anything except the most minimal provision of public goods needed to protect life and property, such as defense. Yet several other strands do see a role for the state to produce varying amounts of public goods and engage in some redistribution, ranging from providing a safety net to the very poorest to assisting victims of past injustices. Only a lenient interpretation of classical liberalism and an expansive version of left-libertarianism, however, support something more akin to our current structure.By examining libertarianism, this Article rounds out a series examining what each theory of distributive justice common to legal scholarship suggests for the chartable tax subsidies. The goal of the series is two-fold. First, it argues that even though the charitable tax subsidies are inherently redistributive, existing scholarship on the topic (which focuses on efficiency and pluralism) generally ignores serious discussions of distributional issues.4 This oversight leaves key questions unanswered in both current law and scholarship: should charities that receive tax benefits be required to help the poor? How valid are common criticisms that subsidized groups do "too much" for the wealthy and "too little" for the poor? How should we evaluate the distributional impact of various proposals to reform the tax benefits given to the non-profit sector?Second, the series explores how each theory of distributive justice common to tax scholarship (equality of opportunity theories, utilitarianism,5 and libertarianism) provides insight into those questions.6 A nuanced analysis of libertarianism yields counterintuitive answers. One reading of minimal state libertarianism, for example, suggests that only charities that help the very poor should be subsidized, whereas another implies that only organizations assisting individuals who have been harmed by past injustices should be subsidized. These two interpretations lend weight to the common criticism that the charitable tax subsidies do not do enough to assist the poor and disadvantaged. In contrast, classical liberalism suggests that groups providing public goods should be subsidized regardless of whether they assist the poor. Within classical liberalism, a strict understanding would likely narrow the definition of what counts as a public good suffering from market failure, whereas a more lenient interpretation might conceive of a strong non-profit sector as a public good in and of itself. Only that more lenient reading and an expansive reading of left-libertarianism support our current structure, in which elite cultural institutions such as the opera are subsidized even if they provide no free or discounted services to the poor. Most readings of utilitarianism and resource egalitarianism also suggest that there is something special about groups that help the poor and disadvantaged. This overlap suggests that the subsidies should be restructured to emphasize aid to such groups.7In exploring the nuances of libertarian theory, this Article starts from a different baseline from its sister articles. …