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Despite libertarianism's political popularity, tax scholarship is largely silent about the interaction between libertarian principles and the structure of our tax system. To fill that gap, this Article mines the nuances of libertarian theory for insights into one feature of our tax system—the charitable tax subsidies—and finds some surprising insights. Although one strand of libertarianism suggests that charitable tax subsidies are in and of themselves illegitimate, several other understandings of libertarianism see a role for the state to engage in a varying amount of redistribution or to provide varying amounts of public goods. Surprisingly, some readings even lend weight to the common criticism that the charitable tax subsidies do not do enough to assist the poor and disadvantaged. Only a lenient interpretation of classical liberalism that conceives of a vibrant non-profit sector as a public good in and of itself and an expansive reading of left-libertarianism support something akin to 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. In addressing these questions, this Article rounds out a series on the interaction of distributive justice and the charitable tax subsidies.

At a time of looming fiscal crisis and virtual unanimity that tax expenditures must be curtailed, tax subsidies for homeownership stand out as among the most costly and unfair of these expenditures. As a result of tax subsidies for homeownership, the government foregoes billions of dollars in revenue each year, most of which benefits wealthy taxpayers. Moreover, subsidies for homeownership encourage overinvestment in housing and underinvestment in other business sectors, which impedes economic productivity, jobs creation and the ability of U.S. businesses to compete in the global marketplace. Scholars and commentators have analyzed extensively the tax subsidy for home mortgage indebtedness but have paid little attention to tax subsidies for home sales. This Article is the first to undertake a comprehensive examination of tax subsidies relating to home sales. The central thesis of this Article is that these subsidies rest upon questionable policy justifications, flawed logical reasoning, and poor design choices. To support this thesis, the Article traces the evolution of tax subsidies for home sales from their surprising origins in a World War I-era tax preference for requisitioned ships to their present incarnation as a practically unlimited tax exemption. This narrative account leads to several important findings. First, it shows how path dependence and bounded rationality have led lawmakers and policymakers to make questionable decisions and support problematic laws. Second, it demonstrates the power of the real estate lobby to shape the story — and the resultant legal rules ― from both tax and social policy perspectives. Finally, it illuminates the political and rhetorical forces that have shaped tax subsidies for home sales. The Article argues that only by understanding where we were before and how we got to where we are now, can we properly assess where we should go from here. In assessing tax subsidies for home sales, the Article evaluates the subsidies by reference to the established tax policy criteria ...