The principle of ability-to-pay in the light of the Polish Constitutional Tribunal’s judgment in case K 21/14

Abstract

In this article, the author examines the constitutional limits of taxing power in light of the ability-to-pay principle and the protection of human dignity, with particular reference to the Constitutional Tribunal’s judgment of 28 October 2015, case K 21/14 which articulated the duty to ensure non-taxation of the subsistence minimum and to provide mechanisms for making that guarantee effective in practice (including indexation). The author presents the structural elements of personal income tax (the rate schedule, tax-reduction amount/tax-free allowance, tax-deductible costs, aggregation or separation of income sources, and loss-offset rules) and argues that the effective protection of the subsistence minimum requires an assessment of the total tax burden rather than of the parameters of the rate-schedule “segment” alone. The coexistence of distinct regimes (general progressive taxation under the scale, the flatrate regime, and the lump-sum regime) produces inconsistencies in the reach of protective instruments and may undermine the guarantee function of the subsistence minimum. On this basis, the author formulates de lege ferenda proposals concerning the following: the introduction of a universal tax credit that would perform the function of a “tax-free allowance” across all income sources; the adoption of limited cross-basket aggregation or, alternatively, a uniform, source-neutral income threshold protected from taxation; allowance for partial cross-basket loss offset at least up to the level of the subsistence minimum; and the implementation of automatic indexation of relevant parameters. The proposed directions are intended to restore systemic coherence and conformity with the axiological framework of Articles 2, 30 and 84 of the Polish Constitution, as invoked by the Constitutional Tribunal in case K 21/14.