Henry Ordower (St. Louis), Capital, an Elusive Tax Object and Impediment to Sustainable Taxation, 24 Fla. Tax Rev. ___ (2021):
Sustainable taxation requires stability and predictability. Sustainable taxation is a tax or taxes that collect sufficient revenue to support the governmental goods and services the society needs and wants. The taxes must provide for 1) even-handedness — something akin to horizontal equity, 2) distributional fairness — a concept emerging from notions of vertical equity, 3) transparency in application so that the populace understands and accepts the tax and the need for it and 4) collection mechanisms that do not favor some societal groups, especially those with resources to secure creative tax advisors, over others who lack the resources. Narrow base taxes — fuel, alcohol, tobacco — cannot meet these criteria and the broad base taxes currently applicable — value added, payroll and income — also fail to meet one or more of the criteria. While specialized taxes like environmental taxes and sin taxes (alcohol, tobacco) serve useful regulatory functions and may achieve their behavioral objectives in part, they do so primarily by increasing the cost of engaging in the undesirable behavior and pricing some actors out of the activity. Using a pricing rather than a direct regulatory mechanism, the specialized taxes change the conversation from social rejection of the behavior to acceptance as long as the actor is willing and able to pay the high price. Is it all right to pollute if one pays to do so? Direct regulation might prove less regressive and less likely to be viewed as simply a matter of price and more as a matter of societal mainstream and commitment to addressing a problem.
To secure sustainable taxation this article recommends a non-preferential income tax on a comprehensive income tax base. While by no means a new idea, the growing resource disparity between affluent individuals and individuals with limited resources renders the idea of a non-preferential income tax on all income including realized and unrealized gains all the more compelling. The paper outlines a method for transition to the recommended tax base from the current realization-based tax base and suggests that in limited cases a taxpayer might defer payment of tax on some items of income but not defer inclusion of the items in the tax base. As it describes its tax plan, the paper reflects on the objectives and shortcomings of the targeted taxes and purposive tax base modifications that have proliferated during the 20th century. The paper concludes that a non-comprehensive tax base may accomplish narrow objectives successfully but is unlikely to become functionally sustainable to support essential governmental goods and services. Neither are targeted taxes and purposive tax base modifications fully justifiable. They are likely to distribute tax burdens unevenly among taxpayers without any compelling reason for preferring some taxpayers to others. The narrowness of the base of such taxes frequently leads to regressive tax incidence.
Henry Ordower (St. Louis), Uniform International Tax Collection and Distribution for Global Development, a *(**)topian BEPS:
International tax reform projects, including the OECD’s Base Erosion and Profit Shifting (“BEPS”) iterations, seek to collect additional tax from multi-national enterprises (“MNEs”) under rubrics of fairer taxation. The reform projects propose various methods of reallocating income that taxpayers have sourced to low and no tax jurisdictions to affluent developed economies for those economies to tax under their own taxing rules. The reallocation would concentrate the bulk of incremental tax revenue into the treasuries of affluent developed economies. The projects focus on allocating the tax base correctly rather than addressing the distribution of tax revenue worldwide.
This article maintains that the need to prevent taxpayers from avoiding payment of a fair tax amount should not result in additional tax revenue primarily for the economically developed economies. Arguments that the right to tax belongs to the developed economies are largely political, not moral. The arguments lack persuasive force in a world of unequal distribution of wealth and resources with which to generate wealth. Rather fairer tax collection should yield incremental revenue to eliminate poverty and improve living conditions for all people worldwide, an issue of tax revenue distribution, not base allocation.
The article addresses fairer tax revenue distribution based on need rather than resources or traditional measures of productivity and proposes as an alternative to other international projects the creation of an international taxing agency to substitute for national taxing agencies worldwide. The international taxing agency would target elimination of world poverty. The new agency would have full authority to collect income taxes from entities and individuals under uniform international, rather than disparate national, taxing rules and procedures and to distribute the revenue worldwide.
Since the global tax will increase tax revenue collection materially, distribution initially might follow a two-step formula. The first step would hold each country harmless from tax revenue loss so that following transition to the global tax, each country receives a share of tax revenue equal to its revenue from income tax in the preceding year, or an average of several years collections, possibly adjusted for inflation, and enable each country to maintain its infra- and superstructure. The second step would follow a needs-based assessment under which the nutrition, housing, education, healthcare and infrastructure needs of less developed countries would be evaluated and a plan developed to ameliorate deficits in all categories worldwide. The agency would distribute incremental tax revenue pursuant to that plan. The second step would devote incremental revenue to the gradual elimination of those deficits -- perhaps addressing life-threatening deficits first followed by improvement of living standards everywhere.
The paper proceeds as follows. Part I contextualizes the problem of base erosion against revenue collection and distribution and provides an overview of the international taxing issues this article addresses. Part II considers a US regional context as a microcosm in which multiple and often overlapping taxing jurisdictions compete for revenue and investment. Some seek to capture additional revenue by annexing high tax yield property, and others with extra-tax and, at times, predatory revenue collection. Many exchange tax concessions for development and highlight the problems of tax competition and proliferating taxing jurisdictions even in the face of centralized tax collection. This part presents a relatively complex proxy for the revenue-raising problems confronting multiple taxing jurisdictions that fail to coordinate their efforts despite the umbrella of a larger governmental unit to which they belong. Part III reviews a variety of proposals and related commentary — BEPS, GLoBE, CCCTB — highlighting the difficulty of harmonization in the face of tax competition and relentless industry pressure for tax-favored treatment. Part IV introduces the factor of relative and absolute poverty and regional development needs that contribute to the proliferation of taxing concessions in exchange for international investment, even where the benefit from the inbound investment is compromised by the loss of potential tax revenue and the corrupt reallocation of the potential revenue into private hands. Part V envisions relinquishment of national tax sovereignty in favor of an international taxing agency with the power to assess and collect tax at a uniform rate or rates under uniform international taxing rules without regard to source, residence or sales. It would base the authority to tax on multiple independent factors so that virtually all income is included and taxed in the worldwide base the international agency administers. Part VI recommends negotiation of revenue shares to dissuade regions from tax competition. It also suggests constructing a framework for formulaic revenue distribution based on relative economic need, including the maintenance of existing infrastructures. Part VII concludes and acknowledges that the project proposes the construction of a “topia” for taxation of MNEs, with the“u” or “dys” depending on individual perspectives.
Alexis Brassey (Cambridge) & Henry Ordower (Saint Louis), The Village of Billionaires: Fair Taxation and Redistribution Amid Relative and Absolute Poverty, 99 Tax Notes Int'l 97 (July 6, 2020):
Tax justice and principles underpinning the international tax regime are in vogue. The idea that companies and individuals need to pay their "fair share", not just in the domestic sense but also the international sense, is now a mainstream position. This paper explores the problems relating to what might constitute a "fair share" by setting out what is meant when this expression is used. A reasonable assumption is to consider taxation as the means by which the state funds public services and in some jurisdictions, contributes to greater equality within society. Those goals, however, give rise to competing claims. This is especially the case when considering international tax challenges, for example those faced by the OECD's 2019 work plan.
This paper, in examining competing claims for tax revenues, considers the specific categories of relative as opposed to absolute poverty. If one accepts that taxation is to fund public services, the question arises, at least in international tax, which jurisdiction's public services? If the motivation for raising tax is to tackle inequality, what has the greater claim, international inequality or national inequality? It is in answering these questions that we need to address the issue of which is more pressing, relative as opposed to absolute poverty?
The contention in this paper is that there is a far stronger moral claim for tax to be redistributed on an international basis rather than on a nation basis. Further, this paper contends that purported moral claims which seek to address inequality within national borders are merely political demands made to further the economic interests of particular groups who themselves are among the most economically privileged, when viewed on an international spectrum.