Thursday, August 31, 2023
Thimmesch: Taxing The Value Of Being Together
Adam Thimmesch (Nebraska; Google Scholar), Taxing The Value Of Being Together (JOTWELL) (reviewing Erin Adele Scharff (Arizona State) & Darien Shanske (UC-Davis; Google Scholar), The Surprisingly Strong Case for Local Income Taxes in the Era of Increased Remote Work, 74 Hastings L.J. 823 (2023)):
The fiscal federalism literature has long recognized that the mobility of capital and labor counsel toward the use of benefits taxes, like property taxes and fees, at local levels to avoid distortions in the location and amount of economic activity. The strength of this accepted wisdom on tax assignment has changed slightly since the so-called “first-generation theory” of fiscal federalism, but the general notion remains strong that local jurisdictions should not impose income taxes on local business activity, because of the risk of losing tax base. And in an era where workers and businesses are more mobile than ever, a tax on local workforces and business income would seem to be on a particularly poor footing.
In The Surprisingly Strong Case for Local Income Taxes in the Era of Increased Remote Work, Erin Scharff and Darien Shanske provide a compelling counter narrative to this accepted wisdom. In doing so, Scharff and Shanske contribute significantly to the fiscal federalism literature and to the current debates about how the ease with which labor and capital can move in the modern world should shape how governments fund their operations, both within the United States and globally. …
Scharff and Shanske conclude their article with brief consideration of the role of the states in helping local governments and a limited discussion of basic implementation principles, but the key work of this article is in providing a counter narrative to the existing literature by being open to the potential role of local income taxes in the local tax mix of the future. My own intuition is much like the authors’. The contours of the economy of the future and where the dust will settle on remote work are unknown. Local jurisdictions, however, have current needs, and their spending will continue to create agglomeration benefits that support the imposition of appropriately designed local income taxes.
https://taxprof.typepad.com/taxprof_blog/2023/08/taxing-the-value-of-being-together.html
