The Mapmaker’s Dilemma in Evaluating High-End Inequality

The last thirty years have witnessed rising income and wealth concentration among the top 0.1% of the population, leading to intense political debate regarding how, if at all, policymakers should respond. Often, this debate emphasizes the tools of public economics, and in particular optimal income taxation. However, while these tools can help us in evaluating the issues raised by high-end inequality, their extreme reductionism—which, in other settings, often offers significant analytic payoffs—here proves to have serious drawbacks. This Article addresses what we do and don’t learn from the optimal income tax literature regarding high-end inequality, and what other inputs might be needed to help one evaluate the relevant issues

An Economic and Political Look at Federalism in Taxation

Part I of this article examines the reasons for preferring locationally neutral taxes and explains the basic tension between locational neutrality and state and local autonomy in taxation. Part II examines the federal judicial check on state and local taxation, which often relies on a principle barring discrimination against outsiders or interstate commerce. Part III explores the need for a broad federal judicial check by examining state and local governments\u27 reasons for imposing (or avoiding) locationally distortive taxes, the countervailing benefits of allowing such governments broad autonomy in taxation, and Congress\u27 willingness to strike down locationally distortive taxes under its Commerce Clause powers. Part IV, the conclusion, provides specific recommendations for congressional and judicial action

Money on the Table?: Responding to Cross-Border Tax Arbitrage

Implicit in the allowance of foreign tax credits is the view that other countries\u27 taxes on the outbound investments of one\u27s residents are relevant to one\u27s own policy choice regarding taxation of these investments. Unilaterally granting foreign tax credits is generally not in a country\u27s short-term self-interest, since, by fully reimbursing foreign taxes up to the credit limit, it invites residents to be indifferent to foreign taxes and foreign governments to impose soak-up taxes on inbound investment. Mitigating double taxation through foreign tax credits is therefore quite different from favoring free trade, which generally increases national welfare, even if done unilaterally. However, reciprocal allowance of foreign tax credits, even if well short of an ideal coordination technique, may leave both cooperating countries better off than would unmitigated double taxation. A country may, therefore, promote both national and worldwide welfare (at least, relative to doing nothing) when it grants foreign tax credits with the understanding that other countries are reciprocating but would likely play tit-for-tat if it reneged. Tax policy debate in the United States frequently ignores or misconceives the relevance to both worldwide and national welfare of interactions between our tax rules and those of other countries. This has been particularly apparent in the ongoing debate concerning what are known as cross-border tax arbitrage transactions. The United States Treasury has proposed to deny American tax benefits to taxpayers engaging in these transactions, provoking vehement opposition from taxpayers who would be adversely affected. Unfortunately, the debate has too often failed to focus adequately on national and worldwide welfare considerations. This paper therefore briefly examines cross-border tax arbitrage, in light of these considerations as affected by countries\u27 strategic interactions. [CONT