TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Thursday, January 19, 2017

Hemel Presents Federalism As A Safeguard Of Progressivity Today At Indiana

HemelDaniel Hemel (Chicago) presents Federalism as a Safeguard of Progressivity at Indiana-Bloomington today as part of its Tax Policy Colloquium Series hosted by Leandra Lederman:

This article considers the distributional consequences of the Supreme Court’s federalism jurisprudence over the past quarter century, focusing specifically on the anti-commandeering and state sovereign immunity doctrines. The first of these doctrines prevents Congress from compelling the states to administer federal programs; the second prohibits Congress from abrogating state sovereign immunity outside a limited class of cases. Each of these doctrines vests the states with a valuable entitlement protected by a property rule and allows the states to sell the entitlement back to Congress for a price. In this respect, the doctrines have an intergovernmental distributional effect, shifting wealth from the federal government to the states.

The distributional consequences of the anti-commandeering and state sovereign immunity doctrines are not purely intergovernmental, however. The doctrines also have potential implications for the distribution of wealth among households. By forcing Congress to bear a larger share of the costs of federal programs, and by shifting some of the costs of liability-imposing statutes from the states to Congress, these doctrines allow the states to raise less revenue and compel Congress to raise more. For a number of historical as well as structural reasons, the federal tax system is dramatically more progressive than even the most progressive state tax systems, and so the reallocation of fiscal responsibility resulting from the Supreme Court’s federalism doctrines causes more revenue-raising to occur via the more progressive system. The likely net effect is a shift in wealth from higher-income households (who bear a larger share of the federal tax burden) to lower- and middle-income households (who would have borne a larger share of the burden of state taxes).

This conclusion comes with a number of caveats. The distributional consequences of the Supreme Court’s federalism doctrines may be moderated—or magnified—by differences in federal and state spending priorities. Moreover, the doctrines may affect the size of government as well as the allocation of fiscal responsibility across levels of government (though the net effect on government size is ambiguous). The bottom line is that federalism doctrines have the potential to affect not only the allocation of rights and resources between the states and the federal government, but also the distribution of wealth across households, and that the anti-commandeering and state sovereign immunity doctrines in particular have progressive (i.e., inequality-reducing) properties that have thus far gone unrecognized.

http://taxprof.typepad.com/taxprof_blog/2017/01/hemel-presents-federalism-as-a-safeguard-of-progressivity-today-at-indiana.html

Colloquia, Scholarship, Tax | Permalink

Comments