Wednesday, February 1, 2023
Kimberly Clausing (UCLA; Google Scholar) presents Capital Taxation and Market Power at Toronto today as part of its James Hausman Tax Law and Policy Workshop Series hosted by Benjamin Alarie:
In recent decades, market power has increased substantially, as shown by measures that include industry concentration, mark-ups, and business profitability. While market power can generate benefits, it also raises vexing policy concerns, including the potential for adverse effects on labor markets, income inequality, and the dynamism of market competition. The concept of market power also has implications for how we conceptualize capital income, making it important to distinguish between normal and above-normal returns to capital. The tax system taxes both types of returns to capital, but often imperfectly and incompletely.
Full consideration of the relationship between market power and capital income suggests important implications for optimal capital taxation design, including the role of entity taxation, the use of graduated business tax rates, and international tax reform.