Abstract
With this Article we begin the process of exploring the ways in which winner-take-all markets can alter perceptions about the appropriate distribution of the tax burden. This is neither a soak-the-rich polemic nor a plea for rejection of the tools of traditional economic analysis. It is an attempt to apply economic analysis to markets that produce unique incentives and that have resulted in a dramatically skewed distribution of income. Winner-take-all markets are probably here to stay, so it behooves us to study them and to consider their operation when crafting tax policy.
In Part II of this Article we analyze the ways in which changes in the distribution of income over the last two decades evidence the growth of winner-take-all markets. We show that the federal income tax system has failed to reflect that growth and has resulted in a system that imposes taxes at dramatic odds with the distribution of pre-tax income. Because this polarity reflects the triumph of efficiency concerns, we turn to an analysis of those concerns in Parts III and IV, where we first consider the possible effects of the diminishing marginal utility of money and then present a quantitative model that shows how progressive taxation can be superior to proportional taxation in providing the greatest overall utility. We turn to the question of equity in Part V, where we explain why we think that progressive taxation is more equitable than proportional taxation. We conclude in Part VI with a proposal for a rate structure that more accurately reflects the relationship between the diminishing marginal utility of money and the skewed distribution of income wrought by the expansion of winner-take-all markets.
Recommended Citation
Martin J. McMahon Jr. and Alice G. Abreu,
Winner-Take-All Markets: Easing the Case for Progressive Taxation,
4 Fla. Tax Rev.
(2001).
Available at: https://scholarship.law.ufl.edu/ftr/vol4/iss1/1