Theories of Personal Deductions in the Income Tax

Personal deductions play an important role in determining individual tax liability. This Article examines three prominent personal deduction models: the tax expenditure model of Professor Stanley Surrey, the personal consumption plus accumulation model of Professor William Andrews, and the market transactions model of Professor Mark Kelman. The Article examines the underlying ethical basis of each model and concludes that none is founded on coherent normative principles. It then presents a model showing how, under certain simplifying assumptions, the medical deduction might be evaluated using two well-known normative principles-utilitarianism and a variant of the Rawlsian maximin principle. Finally, the Article argues that a satisfactory tax policy analysis must make its underlying ethical assumptions explicit and then show how those assumptions map onto a tax structure