TaxProf Blog

Editor: Paul L. Caron, Dean
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Friday, January 12, 2018

Weekly SSRN Tax Article Review And Roundup: Speck Reviews Mehrotra's Taxation And The Modern Liberal State

This week, Sloan Speck (Colorado) reviews a new work by Ajay Mehrotra (American Bar Foundation; Northwestern), Fiscal Forearms: Taxation as the Lifeblood of the Modern Liberal State, in The Many Hands of the State: Theorizing the Complexities of Political Authority and Social Control (Kimberly Morgan & Ann Orloff eds., Cambridge University Press 2017).

Speck (2017)Ajay Mehrotra’s forthcoming book chapter, Fiscal Forearms, serves as a meditation on, and an expansion of, the important ideas advanced in his 2013 monograph, Making the Modern American State. Mehrotra, like the larger edited volume in which his chapter falls, starts from Bourdieu’s metaphor of the state divided into spending and fiscal spheres: a “left hand” comprised of (in Bourdieu’s words) the “social workers . . . which are the trace, within the state, of the social struggles of the past,” and a “right hand” made up of the ministers and technocrats at the treasury, as well as the public and private banks that underwrite the state. Mehrotra develops this metaphor, describing fiscal administration as “the forearms of the body politic” and taxation itself as “the lifeblood of the modern state.” More critically, Mehrotra challenges the claim that social struggle leaves an imprint only on the spending side of the ledger, showing through historical examples that taxation—and especially income taxation—is a contested concept deployed to construct relationships between state and citizen and in service of societal change.

Bourdieu’s metaphor works (or doesn’t work, depending on how one likes metaphors) because it operates on a number of levels. Perhaps most apparent is the corporeal metaphor, grounded in phrases such as “body politic.” The state acts through its hands, which have power by virtue of their connection to arms and the blood that flows through them. In a sense, Mehrotra argues that this blood carries nutrients but also serves a critical hydraulic function, giving structure and fullness to polity.

But Bourdieu also clearly set up some wordplay with his reference to hands, lamenting that, with neoliberalism ascendant in the French government of the early 1990s, “the right hand no longer knows, or, worse, no longer really wants to know, what the left hand does.” With financing disconnected from social spending, Bourdieu saw a fundamental lack of coordination that augured the withering of the robust welfare state of postwar European social democracies. Mehrotra, by contrast, focuses on the advent of the modern American fiscal state in the early twentieth century—almost the converse of the deconstruction wrought since the 1970s by certain advocates of market-oriented economics. Mehrotra notes moments of retrenchment—in the 1920s, for example—but his arc largely focuses on the building of administrative capacities, including by leveraging the private sector, as in the case of withholding. A further complication stems from the Biblical passage to which Bourdieu alludes, which prizes cross-body blindness in the context of charitable giving. This reversal of Bourdieu’s critique echoes historical and current calls among tax policy experts, most notably Stanley Surrey, to cull tax expenditures and separate the taxing and spending functions of government. Although Mehrotra acknowledges this dichotomy in his longer book, the interplay of fiscal innovation and social spending seems ripe for further analysis.

Finally, Bourdieu’s choice of hands emphasizes his observation of a political schism within government. The left hand is on the left for a reason, and the same for the right. Indeed, Bourdieu describes the whole situation as “stupefying and scandalous” because much of the unwinding of French social services occurred under a Socialist government. For me, this interplay complicates Mehrotra’s claims about the power of taxation and fiscal policy to structure social relationships. Mehrotra tells a compelling story about the historically contingent creation of these relationships, one that emphasizes the interactions of progressives and conservatives more than many works. But more could—and should—be said about taxation’s role in what Daniel Rodgers describes as the Age of Fracture. Mehrotra’s chapter provides an excellent launching point for this type of inquiry.

In addition, Mehrotra’s book chapter made me curious about his views on the meaning of fiscal citizenship in the Age of Trump—or the implications of the Age of Trump for the future of fiscal citizenship. Much seems to have changed. While populists in the late nineteenth and early twentieth centuries fought the tariff, present-day self-described populists support it. Similarly, cries of “class warfare” signal a rejection of “ability to pay” rooted in political ideology, often with racial and nationalist overtones. And, if taxation “helps define who is included in the political and social community and who can be excluded,” then current debates about immigration are lacking, since undocumented immigrants and Dreamers pay taxes, often at rates higher than similarly situation documented taxpayers, and often without any guarantee of future inclusion in the social safety net. One reading of Mehrotra’s chapter is as a lens to understand how the state has changed over the last century.

In this vein, Mehrotra argues that keywords such as “ability to pay” remain “protean concepts with multiple meanings” until deployed instrumentally in the public sphere, and perhaps we’re simply witnessing a rapid reconfiguration of meaning. Alternatively, we may be experiencing a more fundamental shift in political norms, away from the “modern democratic institutions” of which taxation is the “linchpin” and towards something more akin to Mehrotra’s “autocratic nations” that take opaque and unilateral actions, such as “selling natural resources to fund their activities.” Emblematic might be the rushed, closed-door process that yielded tax legislation at the end of 2017, which, among other things, opens the Arctic National Wildlife Refuge to private resource extraction and sells the one-time resource of unrepatriated foreign subsidiary earnings for a fraction of their revenue value when accrued. If William James is correct that keywords have “their practical cash value,” then the current environment may be having a cheapening effect on these longstanding concepts. If this shift holds longer-term, Mehrotra’s work gives us much reason to be concerned from a normative perspective.

Overall, Mehrotra’s chapter offers a compelling perspective on the state and taxation that should be required reading for tax experts as well as scholars of the state in other disciplines—and also should serve as a gateway to Mehrotra’s outstanding monograph that explores these issues in more detail.

Here’s the rest of this week’s SSRN Tax Roundup:

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