Tuesday, October 22, 2024
Zhang Presents Fiscal Autonomy In Subnational Taxation Today At UC-Irvine
Alex Zhang (Emory; Google Scholar) presents Fiscal Autonomy in Subnational Taxation at UC-Irvine today as part of its Tax Policy Colloquium hosted by Natascha Fastabend:
Within the United States, two subnational governments have distinctive powers to tax: Native tribes and U.S. territories. Native tribes can tax their own members and the commercial activities of non-Indian actors on reservations. The Supreme Court has grounded this power in both tribal sovereignty and the federal objective of fostering tribal self-governance. But its jurisprudence — in the form of preemption, plenary power, and tax principles — has hollowed out the Native tax base, forcing tribes to compete fiercely with Congress, states, and localities for revenue. By contrast, the U.S. territories face no tax competition. Their residents are generally exempt from federal income and estate taxes. Congress has even delegated to some territories the authority to deviate from federal income-tax rules. Pursuant to this delegation, Puerto Rico has enacted a host of tax incentives to attract the ultra-wealthy to migrate from the mainland, fueling accusations of tax shelter and settler colonialism. The divergent tax treatment of Native and territorial communities paradoxically rests on the same rationale: fiscal autonomy.
This Article makes three main contributions. First, it provides the first systematic study of subnational taxation beyond states and localities. It shows how distinct institutional cultures, collision of interpretive principles, and warring conceptual models have constrained indigenous fiscal capacity while enlarging territorial discretion to tax. Second, the Article contends that fiscal autonomy is a twofold concept, encompassing first-order taxing power and second-order democratic governance. Robust authority to tax by subnational governments demands adherence to the citizens’ vision of distributive justice in fashioning tax policy. Under this normative framework, judicial limits on Native taxing power are misguided. By contrast, the territories’ wide latitude in designing revenue streams merits heightened scrutiny. Third, the Article puts forth policy recommendations. Doctrinal solutions include developing a broader view of Native sovereignty to preclude overlapping tax jurisdictions. As to tax policy, a promising path forward is to provide a uniform, nonrefundable tax credit for all tribal and territorial taxes paid.
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