The Global Market for Tax & Legal Rules
51 Pages Posted: 8 Oct 2014 Last revised: 17 Apr 2017
Date Written: February 6, 2016
The canonical literature in law and economics has argued that tax laws are more efficient than other areas of law (e.g., private law) in redistributing income. Focusing on two basic features of globalization – marketization of the state-constituent relationship and the fragmentation of sovereignty – this Article demonstrates that globalization seriously undermines this conventional wisdom.
Specifically, the electivity of legal regimes under globalization (i.e., the ability of individuals and businesses to choose the laws applicable to them or avoid application of a particular legal regime altogether) is key in determining which rule is a better candidate for efficient redistribution. Therefore, tax rules, with the many opportunities they offer for (particularly well-off) taxpayers to elect to opt out of the taxing jurisdiction, enjoy no a-priori advantage over non-tax rules as a means of redistribution.
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