Inequality Among Whom?: Tax Federalism and the Choice of Distributional Units
Income inequality is a national preoccupation, and the astronomical incomes of Silicon Valley tech billionaires and Greenwich fund managers capture the public’s imagination. But most people do not live in high-wealth enclaves in California and Connecticut, and many of the adverse effects of income inequality are local. Our preoccupation with national inequality can be pernicious because laws that reduce national income inequality can paradoxically increase local income inequality. Using income tax return data, I show how recent proposals for student loan forgiveness and interest payment pauses have precisely this surprising effect.
Understanding the contexts in which income inequalities matter most requires a general account of how incomes translate into the goods that affect individual status, well-being, and opportunity. I argue that this translation of income into power and consumption can be understood as occurring through an architecture of “allocative fields,” which includes commodity markets and political entities such as states and counties. I also propose a new composite measure of income inequality that accounts for the local contexts where it matters most. Viewing income inequality through this lens allows us to see new ways of addressing the adverse effects of income inequality, including accounting for the distributional effects of federal laws at subnational levels, adopting a national priority for the poorest, and renovating the federal architecture of income inequality itself.
About the Law and Economics Workshop
Michigan’s Law and Economics Workshop provides an opportunity for faculty and students from across the University to engage with cutting-edge law and economics research by leading scholars on a wide range of legal and policy topics.
Professors J.J. Prescott ([email protected]) and Jeff Zhang ([email protected]) organize the workshop. If you would like to receive workshop announcements, please contact Alex Wroble ([email protected]) and ask to have your name added to the workshop’s email list.