Today at McGill: Dietsch on Catching Capital

Peter Dietsch, Professor of Philosophy at the Université de Montreal, joins us today as the final speaker in the Spiegel Sohmer Tax Policy Colloquium at McGill. His presentation will focus on the opening chapters of his forthcoming book, entitled "Catching Capital." Here is the abstract:

 When individuals stash away their wealth in offshore bank accounts and multinational corporations shift their profits or their actual production to low-tax jurisdictions, this undermines the fiscal autonomy of political communities and contributes to rising inequalities in income and wealth. These practices are fuelled by tax competition, with countries strategically designing fiscal policy to attract capital from abroad. 

Building on a careful analysis of the ethical challenges raised by a world of tax competition, the book puts forward a normative and institutional framework to regulate the practice. In short, individuals and corporations should pay tax in the jurisdictions of which they are members, where this membership can come in degrees. Moreover, the strategic tax setting of states should be limited in important ways. An International Tax Organisation (ITO) should be created to enforce the principles of tax justice. 

The author defends this call for reform against two important objections. First, Dietsch refutes the suggestion that regulating tax competition will harm economic efficiency. Second, he argues that regulation of this sort, rather than representing a constraint on national sovereignty, in fact turns out to be a requirement of sovereignty in a global economy. The book closes with a series of reflections on the obligations that the beneficiaries of tax competition have towards the losers both prior to any institutional reform and in its aftermath.

The presentation will again take place in the Seminar Room of the Institute for Health and Social Policy, Charles Meredith House, 1130 Pine Ave., Montreal, beginning at 2:35 pm. As always, the colloquium is open to all: students, faculty and the general public are welcome.

Today at McGill Law: Martin O'Neill on Corporations, Tax, and Social Justice

Martin O'Neill, Senior Lecturer in Politics at the University of York, joins us as today's speaker in the Spiegel Sohmer Tax Policy Colloquium at McGill. He'll present a work in progress that he has entitled "Corporations, Conventionalism, Taxation and Social Justice." Here is an abstract:

A failure to take seriously the conventionality of corporations has led to an unimaginative view of corporate taxation as being structurally analogous to the taxation of individuals. There are, in fact, many disanalogies between the two: corporate profit should not be treated as analogous to individual income; low-profit corporations should not be treated advantageously by a tax system in the same way as it should treat low-income individuals; and, most significantly, corporations are not owed the same level of care and determinacy as individuals with regard to the tax rules that they face. Breaking the perceived link between individual taxation and corporate taxation makes room for a reassessment of the structure and purpose of corporate taxation. 

Taking a step back from issues focussed narrowly on taxation, as such, there is a general need to integrate normative issues regarding corporations into our understanding of the proper configuration of the basic structure of a democratic society. In our current non-ideal circumstances, the corporations we actually have are corrosive of the possibility of social justice. In part, this is because we’ve been blinded by a certain picture of corporations as ‘natural’ economic entities, and have been too timid and unimaginative in the ways in which we subject corporations to political regulation and constraint. A robust conventionalism would allow us to reverse the usual order of justification: from seeing corporations as placing constraints on government policy, to seeing corporations as conventional economic units that should be embedded in an institutional and regulatory structure that delivers social justice. 

This gestalt switch opens up wide vistas for public policy innovation. Thus, this is an area in which applied political philosophy has an important home. First, conceptually, it opens up policy spaces which are easy to ignore when one is in the grip of an earlier picture. Secondly, in order to make sense of theories of liberal egalitarian justice, we need a better idea of their institutional setting, and this means moving beyond (or at least supplementing) overly schematic debates about the relative significance of government agencies and individual behaviour. We also need to think about how the basic structure of society should be organized so as to marshal its most significant economic institutions in directions which are conducive to the pursuit of social justice within a democratic society.

The presentation will again take place in the Seminar Room of the Institute for Health and Social Policy, Charles Meredith House, 1130 Pine Ave., Montreal, beginning at 2:35 pm. As always, the colloquium is open to all: students, faculty and the general public are welcome.

Today at McGill Law: Patrick Turmel on The Reasons for Taxation

We continue the Spiegel Sohmer Tax Policy Colloquium at McGill Law today with a presentation by Patrick Turmel, Professor of Philosophy, Université de Laval, who will be discussing a paper he is co-authoring with David Robichaud, Professor of Philosophy, University of Ottawa.  The paper is called "The Reasons of Taxation. Efficiency, Freedom, Equality." Here is the abstract:

In Capital in the XXI century, Thomas Piketty argues for a series of controversial policy recommendations, such as a substantial increase in tax rates on higher incomes and a global tax on capital whose explicit aim is to halt the current spiral of inequality. Piketty’s main argument for these recommendations is not moral, but economic. Indeed, higher tax rates on top revenues and a progressive global tax on capital have not much to do with social justice or equality per se. According to Piketty, they are mostly needed in order to correct the market and maximize efficiency. But Piketty also put forth democratic reasons in favour of fighting inequalities, since they not only threaten the market, but also the very foundations of political freedom. These two types of reasons – reasons of efficiency and reasons of freedom - certainly go a long way to justify fighting the current dynamics of inequality and thus resisting the return of the Belle Époque’s patrimonial capitalism. But they remain somehow weak, when looked at from the perspective of most theories of social justice. They certainly don’t have much normative force when it comes to justifying important redistribution of wealth, as social justice seems to call for. At the very least, they fall short of creating a complete argument. The aim of this paper is to contribute to filling this gap by showing that alongside reasons of efficiency and freedom, a third type of reasons should play a central role in our understanding and justification of taxation, namely: reasons of equality. 

The presentation will again take place in the Seminar Room of the Institute for Health and Social Policy, Charles Meredith House, 1130 Pine Ave., Montreal, beginning at 2:35 pm. As always, the colloquium is open to all: students, faculty and the general public are welcome.

Today at McGill Law: Joseph Heath on Taxation as Collective Consumption

Professor Joseph Heath, Professor of Philosophy, University of Toronto, joins us today as the second speaker in the McGill University Speigel Sohmer Tax Policy Colloquium. Professor Heath is drawing from his book, Filthy Lucre: Economics for People Who Hate Capitalism, (released in the US as "Economics without Illusions: Debunking the Myths of Modern Capitalism"), where he writes about viewing taxation as a "club good":

Individuals express a surprisingly pervasive error that I refer to as the “government as consumer” fallacy. The picture underlying this fallacy is relatively straightforward. Government services, such as health care, education, national defense, and so on, “cost” us as a society. We are able to pay for them only because of all the wealth that we generate in the private sector, which we transfer to the government in the form of taxes. A government that taxes the economy too heavily stands accused of “killing the goose that lays the golden eggs” by disrupting the mechanism that generates the wealth that it itself relies upon in order to provides its services. Thus the government gets treated as a consumer of wealth, while the private sector is regarded as a producer. This is totally confused. The state in fact produces exactly the same amount of wealth as the market, which is to say, it produces none at all. People produce wealth, and people consume wealth. Institutions, such as the state or the market, neither produce nor consume anything. They simply constitute mechanisms through which people coordinate their production and consumption of wealth.

Heath has also pointed us to Todd Sandler's work on "Buchanan clubs."

 The presentation will take place in the Seminar Room of the Institute for Health and Social Policy, Charles Meredith House, 1130 Pine Ave., Montreal, beginning at 2:35 pm.

As always, the colloquium is open to all: students, faculty and the general public are welcome.

Tomorrow at McGill Law: Apple's Tax Planning, through a Philosopher's Lens

Tomorrow at McGill: Wayne Norman, Mike & Ruth Mackowski Professor of Ethics at Duke University, will be here to present the inaugural lecture of the McGill University Spiegel Sohmer Tax Policy Colloquium. He will be talking about how we ought to think about the social pressures coming to bear on multinational tax avoidance, with a special focus on Apple. His presentation is entitled "Corporate Tax and Beyond-Compliance Norms."

Using the media's recent coverage of Apple's tax avoidance strategies as a case study, Professor Norman will discuss how we ought to understand and rationalize corporate social responsibility and self-regulation norms emerging around the taxation of multinationals, and whether these rationalizations are, or should be, different than the rationalization of corporate tax regulation. He will draw upon his previous work on business ethics, including "Business Ethics as Self-Regulation: Why principles that ground regulations should be used to ground beyond-compliance norms as well," and he points us to a 2012 NY Times article by Louise Story, As Companies Seek Tax Deals, Governments Pay High Price.

The topic is obviously timely. If you've been watching the news, you know that it has recently been revealed that Apple and governments get along very, very well when it comes to taxes. In Europe, Apple's side deals with Ireland have come under scrutiny as a possible form of state aid, against EU law; in the United States, Apple has faced lawmakers' bark but no bite. Here is some recent media coverage, most from the Guardian:

• How Apple's Cork HQ became the centre of a bitter global war over corporate tax avoidance 
• Ireland defends tax dealings with Apple: Dublin denies EU commission claims that it helped iPhone maker obtain billions of euros in illegal state aid
• Tough talk on tax means nothing if every country does different things: Obama and Osborne have been quick to promise an end to avoidance. But this is best achieved through collective action
• Apple Tax Probe Details Set to Be Revealed by EU Watchdog (Bloomberg)

I have been saying for some time that even after a century of study, we have yet to articulate a principled way to allocate the global income tax base, and we ought to ask philosophers for help. I am pleased that Professor Norman will engage on the topic.

The presentation will take place in the Seminar Room of the Institute for Health and Social Policy, Charles Meredith House, 1130 Pine Ave., Montreal, beginning at 2:35 pm.

As always, the colloquium is open to all: students, faculty and the general public are welcome.

This Fall at McGill: Colloquium on Tax Philosophy

I am pleased to announce that the annual McGill tax policy colloquium is now being generously supported by the law firm Spiegel Sohmer, Inc., under a grant established for the purpose of fostering an academic community in which learning and scholarship may flourish.

This fall, in its inaugural instalment, the Spiegel Sohmer Tax Policy Colloquium will return to tax policy fundamentals by critically examining the goals of taxation from a law and philosophy perspective.

The Colloquium will therefore be convened jointly by myself and Daniel Weinstock, who is the James McGill Professor in the Faculty of Law and Director of the McGill Institute for Health and Social Policy.  His research explores the governance of certain types of liberal democracies, and the effects of religious and cultural diversity from an ethical perspective on the political and ethical philosophy of public policy.

Each talk takes place in the Seminar Room, Institute for Health and Social Policy, 1130 Pine Ave, from 14:35 to 17:35.  These events are free and open to everyone. We welcome students, faculty and the general public to attend. Here is the line-up:

Monday, October 6: Wayne Norman, Mike and Ruth Mackowski Professor of Ethics, Kenan Institute for Ethics and Department of Philosophy, Duke University. His work focuses on business ethics and his published work includes numerous books and journal articles, as well as contributions to “Ethics for Adversaries: How to Play Fair When You’re Playing to Win.”

Monday, October 20: Joseph Heath, Professor in the Department of Philosophy and the School of Public Policy and Governance at the University of Toronto; Director of the University of Toronto Centre for Ethics. He has published work very widely including the recent book "Enlightenment 2.0: Restoring Sanity to Our Politics, Our Economy, and Our Lives."

Monday, October 27: Patrick Turmel, Professor in the Department of Philosophy, Laval University. His work focuses on ethics and political institutions, particularly cities. His publications include co-authorship of a book titled “La Juste Part: Repenser les Inégalités, la Richesse et la Fabrication des Grille-Pains.”

Monday, November 11: Martin O’Neill, Senior Lecturer in Moral and Political Philosophy, Department of Politics, University of York, U.K. His research examines global and intergenerational justice. Among his many publications, Professor O’Neill’s most recent book is “Property-Owning Democracy: Rawls and Beyond.”

Monday, November 17: Peter Dietsch, Professor, Department of Philosophy, Université de Montréal. He works on questions of distributive justice with particular emphasis on the application of philosophical theories through social instruments including the tax system. His work is widely published, including a recent article titled “Tax Competition and Global Background Justice” in The Journal of Political Philosophy. He is also working on a book on tax competition entitled “Catching Capital”.

I am looking forward to hearing what these pre-eminent philosophers can tell us about the state of contemporary tax policy theory. Over the course of the semester it is my hope that we can develop a framework for thinking about tax policy that responds to the world in which we find ourselves today, with all of its promises and challenges for democracy, economy, and identity.

Choosing Austerity

Menzie Chinn says the austerity being imposed on Greece, Spain etc is self-defeating, while in the US the states are voluntarily choosing austerity, to their own GDP detriment, in order to reduce the state for political reasons.  More:

...the approach of muddling through, dealing on an ad hoc basis with each crisis with aid conditioned on fiscal consolidation, is not working. It's not working partly because in the demand determined models we teach in intermediate macro work cutting government spending and raising taxes tends to depress output, as highlighted in this post. But when the countries affected are closely linked by trade, then the total effect of the contractionary policies conducted in individual countries results in even greater contraction.

Had these economies been on floating exchange rates, the contractionary effects might have been mitigated by depreciated currencies. But membership in the eurozone meant that shock absorber was gone. That is why the prospect of an expansionary fiscal contraction was never very plausible in the case of the GIIPS. But as long as the rest of the eurozone countries were unwilling to provide substantially more financing or transfers to the GIIPS, these governments had little alternative to fiscal consolidation. That is the fate of many, many countries that have faced IMF stabilization packages in earlier decades.

In contrast, the U.S. has currency flexibility so it can save itself, but the states chose austerity, and Chinn shows this has led to lower GDP growth.  Chinn says:

In contrast to Europe, the choice to slash spending and taxes was unforced. In the absence of tax cuts, spending could have been maintained at higher levels. Furthermore, the Federal government had the resources to further support the state and local governments. 

...Truly, much of the distress at the state and local level is essentially a self-inflicted wound, that allows a push for smaller government to proceed under the guise of austerity. 

Charts and more analysis at the link.

On Expertise and Influence: Interview with Ann Pettifor

What constitutes expertise as a social, political and cultural matter?  It involves charts, data, lines on a CV, connections, financial support, and a means of repeatedly broadcasting the same message.  In 2003, Ann Pettifor predicted the global debt meltdown but no one was listening; in this interview with the Renegade Economist [posted at NC], she discusses the crowding out of ideas that is perpetuated because of the structure of interest group-funded economics research.  This sounds so much like the Vijay Prashad interview in regards to the silencing of alternative views from UNCTAD which, like Pettifor, is credited with accurate predictions about the economic crisis.  A similar tale can be told about tax treaty policy making and the turf struggle between the OECD and the UN.  In international tax in general we see the cult of expertise in the claiming of "internationally agreed standards" on tax policy, with I think similar effects--the alternative view is too often silenced, sometimes intentionally but often just by lacking the necessary backing and platforms.

Starting at around the 7 minute mark, Pettifor has a lot to say about institutional expertise and about why we will continue to get more of the same policy prescriptions from influential economists: they are mostly "hired guns" who don't have tenure, while those with tenure, who can "afford to say that which is not mainstream," are few and far between.  She says most economists therefore "are employed in think tanks and research departments that are underwritten by the finance sector.  RE agrees: "if you watch Charles Ferguson's film Inside Job and you see the cowardice of the neoclassical economists at the end who jut blankly refuse to answer the questions and then when they do are full of spite, you get a kind of insight into the murky world you're dealing in."  

Pettifor then talks about conferences where neoclassical and heterodox economists are engaging in dialogue, and she says this is unusual because the neoclassicals "aren't used to dialogue with anyone who doesn't share their world view, and that is so damaging."

Jumping to 10:20, she lays out the intellectual/institutional conflict:

"I am right now reading a speech by a man called Ben Broadbent, who is on the board of the bank of England and who was at Goldman Sachs and who's written a paper saying that the cause of the crisis had absolutely nothing to do with easy money, i.e., unregulated money; it had everything to do with the fact that interest rates were incredibly low.   

Now when I read that paper, it is so deceptive really, and yet it's packed with charts and data, and some sources, even, of information, he does neglect to give us the source of some of his data, that paper, I am convinced, has been written in Goldman Sachs's research department and he's delivered the speech on behalf of Goldman Sachs and he's on the bank of the Board of England.   

Now, that's not a conspiracy.  It's huge political and economic power.  And those of us who have an alternative view don't have that sort of backing, and don't have those sorts of platforms, and that's very damaging for public discourse."

Much more on the substantive economic issues and debate as the interview continues.

Two Tax Conferences of Note

My good friend John Prebble alerts me to two upcoming conferences of interest, one in the States and the other in Australia.  First, he recently issued a call for papers for the Victoria-Cornell Colloquium on Jurisprudential Perspectives of Taxation Law, which will be held at Cornell on Sept. 24-25 (You might like to work this in if you already planning on going to IFA Boston, to be held Sept. 30-Oct 4).   Prof. Prebble and Brad Wendel are co-convening the colloquium, and they are particularly keen to hear from authors interested in applying either or both coherence theory (such as the writing of Ken Kress) and the work of Ludwig Wittgenstein to the analysis of judicial reasoning in leading tax cases.   Heady stuff!  The conference abstract looks fascinating:

"The colloquium will focus on analytical and normative legal philosophy as applied to income tax law, examining judicial reasoning in income tax cases. Seminars will examine such questions as: do legal philosophers’ expositions of the nature of law adequately explain the nature of income tax law? What light do theories of jurisprudence that have not traditionally examined income tax law shed on this question? What is the relationship between law and morality in the context of income tax? Contributions are welcome on all topics of taxation law. (Discussion will generally not be concerned with broad topics of fiscal policy, or, for instance, on whether governments should use taxes to redistribute wealth.)"

That's an unusual set of questions and I look forward to seeing the papers.  The other conference is to be held in Melbourne on Thursday and Friday July 19-20, 2012, and is entitled Defining, Taxing and Regulating Not-for-Profits in the 21st Century.  This is a very timely topic in the U.S. and, it seems, in a lot of other places too.  Here is the conference abstract:

The aim of the conference is to enable academics and other experts to reflect, from theoretical and comparative perspectives, on the theme of defining, taxing and regulating the not-for-profit sector. The conference coincides with a very active period of not-for-profit law reform in Australia, with the establishment of a new national regulator, the statutory definition of charity and other changes to the taxation and regulation of charities and other not-for-profit entities.

The conference features an international cast of characters and should provide a very welcome addition to the comparative tax literature.  Thank John P for bringing these to my attention!

The Right to Justification

Larry Solum recommends Rainer Forst, The Right to Justification: Elements of a Constructivist Theory of Justice (New Directions in Critical Theory):

Contemporary philosophical pluralism recognizes the inevitability and legitimacy of multiple ethical perspectives and values, making it difficult to isolate the higher-order principles on which to base a theory of justice. Rising up to meet this challenge, Rainer Forst, a leading member of the Frankfurt School's newest generation of philosophers, conceives of an "autonomous" construction of justice founded on what he calls the basic moral right to justification.

Forst begins by identifying this right from the perspective of moral philosophy. Then, through an innovative, detailed critical analysis, he ties together the central components of social and political justice—freedom, democracy, equality, and toleration—and joins them to the right to justification. The resulting theory treats "justificatory power" as the central question of justice, and by adopting this approach, Forst argues, we can discursively work out, or "construct," principles of justice, especially with respect to transnational justice and human rights issues.

As he builds his theory, Forst engages with the work of Anglo-American philosophers such as John Rawls, Ronald Dworkin, and Amartya Sen, and critical theorists such as Jürgen Habermas, Nancy Fraser, and Axel Honneth. Straddling multiple subjects, from politics and law to social protest and philosophical conceptions of practical reason, Forst brilliantly gathers contesting claims around a single, elastic theory of justice.

... Forst's master idea is that people have a right and duty of reciprocal justification in the domain of shared institutions and that testing for the justice of such arrangements means testing for how far they are indeed justifiable. 

This is useful in thinking about the rise of global tax activism, where it is not necessarily clear that what people seek is rule or regime change, but rather an accounting of what the rules and regimes have wrought, and a justification for the status quo and its systemic continuation through the construction of international institutions and epistemic communities.

On the to-read list

2 books to read:

Lea Ypi, Global Justice and Avant-Garde Political Agency:.

Why should states matter and how do relations between fellow-citizens affect what is owed to distant strangers? How, if at all, can demanding egalitarian principles inform political action in the real world? This book proposes a novel solution through the concept of avant-garde political agency. Ypi grounds egalitarian principles on claims arising from conflicts over the distribution of global positional goods, and illustrates the role of avant-garde agents in shaping these conflicts and promoting democratic political transformations in response to them. Against statists, she defends the global scope of equality, and derives remedial cosmopolitan principles from global responsibilities to relieve absolute deprivation. Against cosmopolitans, she shows that associative political relations play an essential role and that blanket condemnation of the state is unnecessary and ill-directed. Advocating an approach to global justice whereby domestic avant-garde agents intervene politically so as to constrain and motivate fellow-citizens to support cosmopolitan transformations, this book offers a fresh and nuanced example of political theory in an activist mode. Setting the contemporary debate on global justice in the context of recent methodological disputes on the relationship between ideal and nonideal theorizing, Ypi's dialectical account illustrates how principles and agency can genuinely interact.

and

Johnathan Schlefer, The Assumptions Economists Make:

Economists make confident assertions in op-ed columns and on cable news—so why are their explanations often at odds with equally confident assertions from other economists? And why are all economic predictions so rarely borne out? Harnessing his frustration with these contradictions, Jonathan Schlefer set out to investigate how economists arrive at their opinions. 

While economists cloak their views in the aura of science, what they actually do is make assumptions about the world, use those assumptions to build imaginary economies (known as models), and from those models generate conclusions. Their models can be useful or dangerous, and it is surprisingly difficult to tell which is which. Schlefer arms us with an understanding of rival assumptions and models reaching back to Adam Smith and forward to cutting-edge theorists today. Although abstract, mathematical thinking characterizes economists’ work, Schlefer reminds us that economists are unavoidably human. They fall prey to fads and enthusiasms and subscribe to ideologies that shape their assumptions, sometimes in problematic ways. 

Schlefer takes up current controversies such as income inequality and the financial crisis, for which he holds economists in large part accountable. Although theorists won international acclaim for creating models that demonstrated the inherent instability of markets, ostensibly practical economists ignored those accepted theories and instead relied on their blind faith in the invisible hand of unregulated enterprise. Schlefer explains how the politics of economics allowed them to do so. The Assumptions Economists Make renders the behavior of economists much more comprehensible, if not less irrational.