Monday, March 27, 2006
This Article focuses on justice considerations in designing tax policies under competitive conditions. In the international tax scene national sovereigns compete for residents, investments, and tax revenues. This position of nation-states as competitive players dramatically affects the range of policies that such countries can pursue. This Article examines the choices facing benevolent national sovereigns aspiring to promote efficiency and distributive justice. Specifically, the Article evaluates the current debate in international tax policy between harmonization and tax competition. The Article first considers the national level, and assesses the effect of harmonization and competition on the size of the national welfare pie and its distribution, the composition of the group, decision making processes, and the distribution of political power within society. It then examines the results of tax competition and tax harmonization at the global level as well, as even sovereigns that adopt a national-political conception of justice should take such global effects into consideration where their actions may harm other nations and their nationals. The Article concludes that while harmonization may indeed allow states to preserve the welfare state, it is neither a feasible nor a desirable solution.