Rawls compares two types of institutional regime, â€œwelfare state capitalismâ€ and â€œproperty-owning democracyâ€. The latter differs from the former by trying to satisfy a given predistributive ideal in which capital (both physical and human) is dispersed and market operations take place under conditions of proximate equality. The paper investigates the relation between property-owning democracy and the income tax vs. legal rules debate. One question is whether a possible preference for property-owning democracy against welfare state capitalism matters for the proclaimed superiority of the income tax as a distributive tool. The answer, following the article, is negative. Another question is whether criticisms against the superiority of the income tax are relevant for property-owning democrats. The answer, in this case, is â€œyesâ€. Some flaws of the income tax as a distributive means invite one to consider strategies to implement property-owning democracy and capital dispersion through several parts of the property rights system instead of only through tax-and-transfer policies.