Consumer Law As Tax Alternative

Posted: 26 Dec 2017 Last revised: 6 Apr 2018

Rory Van Loo

Boston University School of Law; Yale Law School

Date Written: December 19, 2017

Abstract

Policymakers and scholars have in distributional conversations traditionally ignored consumer laws, defined as the set of consumer protection, antitrust, and entry barrier laws that govern consumer transactions. Tax law dominates distributional conversations partly because legal rules are seen as less efficient and partly because consumer law research speaks to narrow and siloed contexts—deceptive fees by Visa or a proposed merger between Comcast and Time Warner Cable. Even millions of dollars in reduced credit card fees seem trivial compared to the trillion-dollar growth in income inequality that has sparked concern in recent decades. This Article is the first to synthesize the fragmented empirical literature quantifying inefficiently higher consumer prices across diverse markets—called overcharge. If economists’ overcharge empirics are to be believed, the current legal framework allows businesses to overcharge consumers well over a trillion dollars, or approximately ten percent of all that consumers spend. The data available also suggests that low- and middle-income consumers likely disproportionately pay overcharge. Moreover, reducing consumer overcharge could bring the share of income earned by the top one percent of households from its current level—twenty percent of all income—to about where it was in 1980, when the top one percent earned ten percent of all income. Moreover, this massive redistribution would be driven by laws making markets more competitive, rather than tax increases that distort markets. And they would hit two types of inequality—on the spending side, and on the income side. If the empirical literature currently available is right, consumer law merits serious consideration as an alternative to tax.

Suggested Citation

Van Loo, Rory, Consumer Law As Tax Alternative (December 19, 2017). Available at SSRN: https://ssrn.com/abstract=3090800 or http://dx.doi.org/10.2139/ssrn.3090800

Rory Van Loo (Contact Author)

Boston University School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Yale Law School

127 Wall Street
New Haven, CT 06511
United States

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