Yesterday at the NYU Tax Policy Colloquium, we discussed Miranda Stewart’s International Tax Law and the Equilibrium Between States and Corporations. This is an earlier draft than our 2 prior colloquium papers this semester, so the full direction that it will take remains open.
It explores the relevance, both for business taxation and more generally, of 2 major and ongoing 20th and 21stcentury developments: (a) the rise of big business organized through firms that are themselves internally non-market entities (run by hierarchy rather than bargaining), and (b) the international / globalization dimension.
The paper makes use of Klaus Vogel’s work (reflecting its origins in a Klaus Vogel Lecture at Vienna University), along with that of important political scientists and economists discussed by Vogel – for example, E.E. Schattschneider, John K. Galbraith, and Ronald Coase.
I’ll present my thoughts on the paper and its interests in 3 buckets: (a) Vogel’s here-relevant work, (b) why do large business entities and the international dimension matter, and (c) the notion of “equilibrium” that Vogel and Stewart discuss.
1. KLAUS VOGEL’S WORK ON “TAX JUSTIFICATION”
Vogel is famous and much-read by tax lawyers in Europe; much less so here. As one might well expect, this is partly due to American chauvinism and self-centeredness (plus the language barrier), although it may also reflect the greater primacy of economics in US than in EU tax law scholarship.
While Vogel’s best-known work discusses tax treaties, the item of interest here is his US-published (in English) 1988 article, The Justification for Taxation: A Forgotten Question.
Here Vogel argues that “taxing requires justification … because it intrudes on the personal rights of those taxed.” He felt that business taxes in the 1980s had perhaps gotten too high, and he noted contemporary tax revolts in Europe (like those then also occurring in the US) might suggest that something was wrong.
The problem that many contemporary readers (including me) will have with this formulation is that, as Murphy and Nagel put it around 15 years after The Justification for Taxation came out, it seems to rely on a claim of entitlement to one’s pretax income. It thus collides with the Murphy-Nagel argument that people aren’t inherently morally entitled to pretax income that reflects the entire Their critique of “everyday libertarianism” would certainly appear to apply to Vogel.
Vogel also says that, “to the extent legally incorporated enterprises are taxed, taxing requires justification because it touches on the distribution of functions and weights between the State and the economy.” In effect, corporations have some degree of moral entitlement to the role they get to play in a free market economy. Thus, they ostensibly must gain overall from the deal, and overtaxing them would raise concerns not just of efficiency and the effect on economic growth, but also of unfairness to them. To me, this rather sounds like everyday libertarianism on stilts.
Still, I agree that it matters whether people think the system is sufficiently fair to merit consent. Moreover, as a practical matter, this may need to include politically powerful business leaders whose cooperation and non-estrangement may be practically important. Maybe one should call this assent, rather than consent, to make clear that it does not involve applying, say, a contractarian framework.
When one considers Vogel’s concern about oppressive over-taxation, perhaps one aspect of his biography might be illuminating. He was born in Germany in 1930. This made him the perfect age to observe a monstrously tyrannical government without (as still a minor at the end of World War II) being personally compromised.
This helps influence me to conclude that, while I am not in direct intellectual sympathy with how he poses the claimed need for “tax justification,” it might offer a useful proxy for concerns about potential government over-reaching and the issue of basic social assent.
2. WHY DO BIG BUSINESS & THE INTERNATIONAL DIMENSION MATTER?
I agree with Vogel and Miranda that, as a practical matter, the growth of big business matters to the functioning of the tax state. But the harder questions are why and in what ways it matters. Here I would question (at least, as of 2026) a key reason why Vogel in 1988 deemed the rise of big business to have been very important. If government is potentially a behemoth, how does one restrain it? Well, suppose there is another behemoth, namely the world of big business. Then a balance of power between them may prevent either of them from getting out of hand.
Well, here’s the problem. Trump took office in 2025, evidently bent on establishing authoritarian dominance over pretty much everyone and everything he could get inside his smelly and grasping little hands. Thus, thank goodness the powerful titans of industry – for example, Elon Musk, Jeff Bezos, Mark Zuckerberg, and the Ellisons – were all just waiting there, ready to decisively and decidedly rein (not reign) him in.
Oh, wait a second … that’s not what actually happened.
What might be some other reasons why the rise of big business has been so important, both to the “tax state” (a term borrowed by Vogel from Joseph Schumpeter) and more generally? Well, take your pick. But a couple of possible answers can be derived from two famous American intellectuals whose work Vogel discusses in The Justification for Taxation.
As an aside, this article by Vogel is extremely well-read in various branches of the broader economics and political science literature. The one important thing it’s missing is the entire Mirrlees-inspired optimal taxation literature.
Among the key forefathers whose work he discusses are Schattschneider and Galbraith. But I get something different out of their work than he does, albeit perhaps in part because it is now 2026 rather than 1988.
Schattschneider is a bit of a personal favorite. I used his work a bit in my 1990 piece, Beyond Public Choice and Public Interest: A Study of the Legislative Process As Illustrated by Tax Legislation in the 1980s. Not to mention which, I have a second cousin who is married to his granddaughter (!). But no family ties are needed to make his work of continuing interest today.
He was a leading 20th century political scientist on the topic of interest group politics, with an interest both in how it operated and in how its ill effects might best be mitigated (he thought, via the role of strong political parties). His two writings with the greatest shelf lives came 25 years apart. In 1935, he published a classic study of the already-infamous Smoot-Hawley tariff, showing how logrolling had helped to create an economic disaster. To wit, say Company A wants a huge protectionist tariff that will impose some costs on Company B due to its own importing needs. Not to worry, Company B will just get its own huge tariff, rather than contesting the one sought be Company A.
Then in 1960, he published The Semisovereign People, a takedown of optimistic 1950s pluralism, which had viewed interest group politics as assuring that all were represented via their interests. Not so, Schattschneider says: "[T]he notion that the pressure system is automatically representative of the whole community is a myth." Rather, the "system is skewed, loaded and unbalanced in favor of” the upper classes.
Even if we’ve lost his faith in the party system, I’d say that this critique resonates today!
Next, let’s turn (as Vogel did) to Galbraith. By the late 1950s, Galbraith was arguing that the role of large corporations with market power, along with the ability to shape consumer preferences, means that standard free market models don’t explain the economy very well. Instead, we are being run by bureaucratic systems, corporate as well as governmental, giving enormous sway to people with great power who are insulated from competitive economic and political pressures.
Galbraith was thinking about companies like General Motors. The US car market was oligopolistic, mainly featuring just GM, Ford, and Chrysler, and with only limited imports at the time. They all had similar lousy cars, perhaps sold at prices reflecting their collective market power, and they also used the power of mass advertising to gull a lot of people into buying the new model each year.
Much though the world has changed since Galbraith wrote, he may offer us a promising and modern way to think about where we are today. Thus, consider the vast sway today of Amazon, Apple, Facebook, Google and such.
The story today, as compared to when Galbraith wrote, may also be driven by the rise of extreme high-end wealth concentration. Thus, consider how 3 oligarchs have recently savaged what had been 3 key institutions for public discourse: Musk and Twitter, Bezos and the Washington Post, and the Ellisons and CBS News.
None of this was primarily about profit. Musk was evidently willing to lose tens of billions of dollars for the pleasure of getting to Nazify Twitter. Bezos was saving chump change by gutting the Wa Po’s news division and turning its Op-Ed page into a dependent institution. The Ellisons’ flunky Bari Weiss couldn’t wait to hamstring 60 Minutes, even at the risk of a huge ratings loss. So these episodes were all about the oligarchs’ immense discretion and power in the absence of significant market or wealth constraints.
From applying Schattschneider’s and Galbraith’s perspectives to the rise of big business, one could perhaps tell a different and much darker political science (and economics) story than that which Vogel has in mind.
3. EQUILIBRIUM
This is a key concept to both Stewart and Vogel, although neither entirely defines it. But I think it means 2 main things for them.
First, one can think about political economy equilibria in something like the standard microeconomic sense. As an example of the latter, suppose that a new tax preference for orange juice producers leads to a higher supply curve. It takes a while for the quantity and price to reach their new equilibrium levels in light of the tax preference.
Likewise, suppose that multinationals get better at profit-shifting and other tax planning, while also becoming legislatively influential around the world given the money and power that they have accrued. Then one might expect a sharp drop in the political economy equilibrium re. how much tax they will find themselves needing to pay.
But the world didn’t just stop there, given all the global pushback over the last ten-plus years. So the papers’ second sense of equilibrium refers to a stable set of arrangements that is not economically and politically feasible but that attracts general assent as a tolerable state of affairs. That we clearly do not have as yet in the international tax realm.
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