Tuesday, September 28, 2021
Daniel Hemel (Chicago; Google Scholar) presents Law and the New Dynamic Public Finance virtually at NYU today as part of its Tax Policy and Public Finance Colloquium hosted by Daniel Shaviro:
Over the last two decades, a new movement in academic economics has challenged conventional wisdoms in optimal tax theory and generated fresh insights for real-world tax policy. Known as “the new dynamic public finance,” this movement has altered the way that economists think about labor income taxation, capital taxation, and the credibility of tax policy over time. Along the way, the NDPF literature has identified new justifications for previously perplexing features of the existing tax-and-transfer system and has called other elements of the status quo into serious question.
Mainstream economics has embraced the new dynamic public finance revolution. All the top peer-reviewed economics journals publish NDPF papers. Undergraduate public finance textbooks cover basic NDPF concepts. But legal scholars—including scholars of tax law—have largely ignored the emergence of NDPF. One notable exception is Daniel Shaviro, whose 2007 article “Beyond the Pro-Consumption Tax Consensus” highlighted NDPF’s implications for income-averaging proposals and the choice between income and consumption tax bases.3 Since then, though, only seven law review articles in the Westlaw database have even mentioned “the new dynamic public finance,” and none has sought to take stock of NDPF’s wide-ranging implications for legal analysis.
Like other joinders of law and economics, law and the new dynamic public finance does not yield a single set of unambiguous policy prescriptions. But it does reveal unappreciated justifications for existing policies and calls attention to cases in which current law may be misfiring. The conclusions don’t fit neatly within existing ideological categories; they are not always comfortable; and they may not all turn out—after further inquiry—to be right. But a serious effort to address the problem of income inequality over the lifecycle will likely require sustained engagement with NDPF’s insights. And at the very least, even if NDPF does not lead the way to a more egalitarian future, it promises a richer understanding of the tax-and-transfer system that we already have.
But a serious effort to address the problem of income inequality over the lifecycle will likely require sustained engagement with NDPF’s insights. And at the very least, even if NDPF does not lead the way to a more egalitarian future, it promises a richer understanding of the tax-and-transfer system that we already have.