The U.S. political system suffers from endemic design flaws and is notable for the way that a small subset of Americans—whose interests often don’t align with those of the vast majority of the population—wields disproportionate power. Absent organized and persistent action on the part of ordinary Americans, the system tends to serve the already powerful. That’s why this text is called Attenuated Democracy. To attenuate something is to make it weak or thin. Democracy in America has been thin from the beginning and continues to be so despite some notable progress in voting rights. As political scientists Benjamin Page and Martin Gilens wrote, “The essence of democracy is not just having reasonably satisfactory policies; the essence of democracy is popular control of government, with each citizen having an equal voice.” (1) Since this is likely to be your only college-level course on the American political system, it is important to point out the structural weaknesses of our system and the thin nature of our democracy. Whenever you get the chance—in the voting booth, in your job, perhaps if you hold elected office—I encourage you to do something about America’s attenuated democracy.
This textbook is not intended to be an exhaustive treatise; rather, it is intended to be far more useful than that for beginning tax law students by equipping the novice not merely with unmoored detail but rather with a rich blueprint that illuminates the deeper structural framework on which that detail hangs (sometimes crookedly). Chapter 1 outlines the conceptual meaning of the term “income” for uniquely tax purposes (as opposed to financial accounting or trust law purposes, for example) and examines the Internal Revenue Code provisions that translate this larger conceptual construct into positive law. Chapter 2 explores various forms of consumption taxation because the modern Internal Revenue Code is best perceived as a hybrid income-consumption tax that also contains many provisions—for wise or unwise nontax policy reasons—that are inconsistent with both forms of taxation. Chapter 3 then provides students with the story of how we got to where we are today, important context about the distribution of the tax burden, the budget, and economic trends, as well as material on ethical debates, economic theories, and politics as they affect taxation. Armed with this larger blueprint, students are then in a much better position to see how the myriad pieces that follow throughout the remaining 19 chapters fit into this bigger picture, whether comfortably or uncomfortably. For example, they are in a better position to appreciate how applying the income tax rules for debt to a debt-financed investment afforded more favorable consumption tax treatment creates tax arbitrage problems. Congress and the courts then must combat these tax shelter opportunities (sometimes ineffectively) with both statutory and common law weapons. Stated another way, students are in a better position to appreciate how the tax system can sometimes be used to generate (or combat) unfair and economically inefficient rent-seeking behavior.