Paul L. Caron

Wednesday, February 26, 2020

Distributive Justice, Indirect Tax, And Emerging Technologies

Andrew Leahey (LL.M. Tax 2019, NYU), Distributive Justice, Indirect Tax and Emerging Technologies: Problems and Solutions:

This paper first gives a brief overview of the concept of distributive justice, and how it might apply to indirect tax rulemaking, expenditures and enforcement. It then gives an overview of the concept of indirect taxation, and applies the aforementioned distributive justice concepts to a concrete example – state sales tax in the United States. This paper proposes policy and enforcement solutions, enabled now by emerging technologies, that might help move indirect and sales tax towards justice. Finally, it outlines conclusions and known limitations to this paper and its underlying proposals.

An examination of the layout of roads in any major city will reveal what happens when iterative technology forces changes to infrastructure. Meandering roadways that are too narrow for modern cars, alleyways not wide enough to be of any practical utility, and city planners tasked with clawing back pedestrian paths from sprawling multi-lane roads in the center of town. What happened? They paved the cowpaths.

Policy that is enacted only to patch current problems, without an eye to the future, leads to old problems being propagated in a new marketplace. It is clear that the current indirect tax system will not continue unchanged: contactless payment through NFC is becoming increasingly ubiquitous, “smart” credit cards are replacing those bearing magnetic strips, PayPal payments are accepted at Home Depot and the flea market vendor has a modified iPad for accepting credit card payments – things are changing on the consumer side. Tax authorities will need “get with the times” sooner or later.

It is a truism that government is slow to change and loathed to adapt. The next step in indirect tax technology will need to carry authorities well in to the new century we must make sure they are not carrying their analog baggage with them in to the digital future. Current indirect tax regimes in the United States, specifically state sales tax, perpetuate injustices that necessitate deploying new technology. The emergence of new technology in a given space carries with it the potential for great (new) injustice and the digitization of existing analog injustices, in the absence of mindful policy. Traditional concepts of distributive justice, such as those typified by the work of John Rawls, can be adapted in to policies and, frankly, code to ensure the new technology furthers the interests of justice.

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