Category Archives: Uncategorized

Terms of Employment

Jan 10, 2023 Susan MorseAdd a Comment

Under tort and agency common law, the more control a firm exerts over its workers, the more likely that workers will be classified as employees rather than independent contractors. The need to determine control prompts a line-drawing exercise and offers opportunities for firms and/or workers to manipulate the result, rather than choosing the best abstract analysis on the facts. In Independent Contractors in Law and in Fact: Evidence from U.S. Tax Returns, Eleanor Wilking constructs a huge tax-return-based dataset and uses it to show that firms appear to game the employee/independent contractor distinction, that evidence of manipulation is stronger when lower-income workers are involved, and that the tendency to classify workers as independent contractors has likely increased over time.

A lot turns on whether a worker is an “employee.” Access to retirement plans, health insurance, certain government benefits and antidiscrimination protections follow from employee status. Tax, tort, contract, intellectual property and other legal results often differ based on whether a worker is an employee. Most, although not all, legal features require firms to offer more protections and benefits for employees, as opposed to independent contractors. Thus a firm’s incentive to manipulate generally tilts towards independent contractor classification, holding all else equal, particularly for lower-income workers.

Wilking created two datasets for this project. Both take advantage of the fact that different tax reporting forms for compensation are required according to worker status. An independent contractor receives a 1099-MISC or 1099-K, while an employee receives a W-2.

The first dataset is the “descriptive analysis sample,” shown in Table 1. This is an enormous data set with about 70 million observations, each a compensation information return linked to an individual tax return, drawn from a 2% random sample of all electronic W-2, 1099-MISC, and 1099-K filings available for the tax years 2001-2016. The second dataset is the “causal analysis sample,” shown in Table 4. This panel data set covers about 120,000 employees and includes ten years of data for each employee, starting when the employee is age sixty.

In her descriptive analysis, Wilking shows that independent contractor relationships, as reported on Forms 1099-MISC or 1099-K, have grown dramatically, from about 38 million to 57 million reports from 2001 to 2015. She proposes, based in part on a twenty-factor test developed by the IRS, that six quantitative metrics should correlate with independent contractor status. These are: smaller share of income, larger number of payers, longer distance between home and work, shorter job tenure, higher compensation volatility, and more business deductions taken by the worker. Wilking hypothesizes that independent contractor classification should correlate with each of these metrics, if the firms and/or their workers use an evenhanded application of the common-law test.

But Wilking finds that these metrics often do not differ significantly for independent contractors as opposed to employees, especially for workers whose income is below the sample’s median. For these low-income workers, share of income, number of payers, tenure, and compensation volatility generally converge whether a worker is classified as an independent contractor or as an employee (Figures 9-14). This suggests manipulation to achieve a better tax (or other) result, without any meaningful shift in the underlying facts of the work relationship.

The manipulation hypothesis draws some support from Wilking’s causal analysis. She exploits features of the Medicare rules that distinguish payment obligations for workers of age 65 or older based on whether the work is for a large firm, with twenty or more full-time employees; or a small firm, with fewer than twenty full-time employees. A large firm’s health insurance plan is the primary payer of worker medical expenses, and Medicare is secondary – but only for employees, since a 1099-MISC recipient typically is not covered by employer insurance. In contrast, for a small firm, Medicare is the primary payer of worker medical expenses, even for employees.  Wilking finds that, when workers in her sample turn 65, an employee at a large firm (proxied as a firm that issues at least 50 W-2s) is 0.08 percentage points more likely to transition from receiving a Form W-2 to receiving a Form 1099-MISC from the firm.

Wilking offers an imaginative use of a huge treasure trove of tax return data. Her results are powered not only by the enormous datasets she creates, but also by her creativity in fashioning quantitative proxies for the question of control posed by the common law of tort and agency. As compared to, say, the outcomes of reported cases, patterns of firm and worker planning are difficult to discover and describe. They are buried in countless private contracting and planning decisions that rarely receive any public attention. Wilking has figured out how to use tax return data to excavate patterns of private ordering that are usually hidden from view. What a contribution — both because of Wilking’s specific findings and because of her clever, large-dataset matching methodology.

To this original empirical contribution Wilking adds some tentative normative remarks. She invokes Professor David Weisbach’s classic criticism of line-drawing and reviews the incentive to manipulate or intentionally misclassify when discrete and different legal results lie next to each other on a continuum. She suggests that some such line-drawing exercises might eventually become obsolete. If they did, the question would arise of what should replace existing binary paradigms, like those that give firms and workers different benefits and responsibilities under many areas of law depending on how much control the firm has.

What Do We Know About the US Corporate Income Tax?

Nov 24, 2022 Charlotte CraneAdd a Comment

In the most recent update of the Congressional Research Service pamphlet, Corporate Tax Reform: Issues for Congress, RL34229 (2021), Jane Gravelle presents a survey of the recent economic literature that has been invoked to support various changes in the corporate income tax. Gravelle is an economist who has spent her career bridging the gap between academic approaches to tax and the nitty gritty of tax policymaking within the beltway. In this document she explains how little anyone knows about the corporate income tax in the US.

As Gravelle points out, the corporate income tax has shrunk in importance in the last 70 years, declining from 30% of federal tax revenues and 5.6% of GDP to less than 10% of federal tax revenues and less than 3% of GDP. Of course, at the beginning of that time period, the corporate income tax could be used for the purposes of most economic analysis as essentially the equivalent of all business income taxes. As Gravelle points out, the rise of other business forms that afford the benefits of incorporation without attracting the corporate tax is responsible for a large portion of this shift. Sheltering through offshore entities has contributed much of the rest.

The report is in many respects a brief against arguments to the effect that raising corporate rates will actually lower the revenue collected or will impose unintended burdens on labor. Gravelle reviews the recent economic studies regarding various impacts of an increase in the corporate tax. These include those studies exploring the behavioral responses (under what conditions is a Laffer-revenue-reducing response possible), the incidence (does labor bear the corporate tax, and if so, what part of labor) and the distributive effects (who owns the capital most affected).

The summary provided of this literature is rather dense, especially since it assumes the reader is fully conversant in both the statistical methods and the classic models involved. The benefit to the non-economist reader is not an easily digested synopsis of each of these recent studies, although the references are more than adequate for the reader hoping to build a firm background in the literature. The virtue in this report is instead the revelation of the weak spots in the literature on which current policy debates rely.

The report is far more useful than just a debunking of some of the current economic literature and the tendency for overclaiming by those relying on it. It also outlines in summary fashion the actual structure of the current tax structures through which business income is taxed and summarizes the tax rates actually imposed on income derived through various business forms. In particular, Table 1 on page 8 shows different effective tax rates for various alternative forms of organizations under alternative rate structures, assuming a 29.6% individual rate. The range and complexity of the effective rates that could be applicable to domestic business income, depending upon the choice of form and distribution, may come as a surprise to those who deal only with the individual income tax, or with only the corporate income tax. This thoroughness will be helpful for those trying to comprehend the current complexities, not just for those whose expertise is not in corporate tax, but also for those approaching the topic from a legal perspective who need to understand better the economic perspective on the topic.

Finally, the report describes various current proposals pending before Congress. In many ways, this report, like many other CRS reports, documents the preliminary steps taken by Congress but no longer memorialized in committee reports and other once-common types of legislature history. Those unfamiliar with CRS reports more generally—or who think that they are still hard to obtain—should visit the CRS website and explore what Gravelle and her fellow CRS writers have to offer.

What’s Going On with Self-Employment?

Oct 25, 2022 Emily SatterthwaiteAdd a Comment

Are there more self-employed people, or not? IRS data shows a significant increase in the portion of the workforce reporting positive net income from self-employment on their tax returns. It rose by about 20 percent after 2000, peaking in 2014 at just under 12 percent. However, annual labor force surveys suggest that the self-employment rate has been flat since 2000. How can these two results be reconciled? This question motivates a terrific new paper by Andrew Garin, Emilie Jackson, and Dmitri Koustas entitled, New Gig Work or Changes in Reporting? Understanding Self-Employment Trends in Tax Data.

The authors mine IRS and linked Social Security Administration data to explore two hypotheses.  The first hypothesis is that gig work is driving the increase in self-employment. The second is that income-based incentives in the tax code are causing individuals to report more self-employment income. The authors quickly reject the first hypothesis. They use a methodology that allows them to identify whether tax-reported earnings are from an online platform economy (OPE) firm or not. They conclude that OPE work does not explain the increase in taxpayer-reported self-employment. (P. 2.)

Then, the authors explore the tax code’s incentives to report additional income. For individuals with dependents and earned income in the phase-in range for tax credits like the Earned Income Tax Credit (EITC) and Child Tax Credit, reporting additional income results in a larger refundable credit.  This could motivate individuals to report self-employment income who otherwise would have reported none. To investigate this, the authors look at the growth in the propensity to report earnings from self-employment across different groups of taxpayers over time. They find that for EITC recipients with children, the propensity to report self-employment income grew from 14 percent in 2000 to over 20 percent in 2010. For childless EITC recipients who lack similar incentives to report additional income (because they face positive marginal tax rates throughout the credit’s phase-in range), there were only modest changes in propensity to report. Further, most of the growth was found among women at the time of first childbirth and was concentrated among households combined wages below the first EITC kink point, where incentives to report are highest. (P. 11.)

The correlation between reporting more self-employment income and eligibility for larger refundable tax credits could mean either a real labor supply response (individuals actually working more in a self-employed capacity) or a pure reporting response, whether related to fake or real self-employment income. To disentangle real labor supply from pure reporting effects, the authors surmise that parents expecting a first child around the end of the year will face uncertainty about the year in which the birth will occur—and the corresponding EITC-eligibility status for that year—until the end of the year, at which point labor supply decisions for that year have already been made.  They then use a regression discontinuity approach in which they compare reported self-employment earnings for parents with first births that occur right before the end of a given tax year to those with births that occur right after the end of the tax year.

The new parents with first births in December provide strong evidence that there is a pure reporting response. The authors’ main result is visually striking: the propensity to report self-employment income (but not 1099-third-party-reported income) is higher before January 1 and is concentrated among individuals with W-2 wages in the EITC phase-in range. (Figure 4). By contrast, there is no effect for individuals with wages in excess of the EITC phase-in range. For individuals with an incentive to report, the share reporting self employment earnings increases by an average of 4.6 percentage points from a baseline rate of 10.8 percentage points (43%). (P. 16.) The authors also find that this reporting effect has increased approximately fivefold from 2000 to 2015. This is staggering: among taxpayers with first births in December and January, the entire increase in the propensity to report self-employment income after first births can be accounted for by a pure reporting effect that has grown dramatically over time. (P. 23.)

The next step is to investigate the source of this pure reporting effect. Are individuals fabricating self-employment income on their tax returns to maximize refunds? Or are individuals with actual self-employment income that would have otherwise gone unreported properly reporting that income? (P. 18.) Using data from National Research Program audits of randomly-selected 1040s, they find “that while almost no one incorrectly reported self-employment income in 2001, the share doing so has risen substantially over subsequent years, but only among individuals with a tax incentive [to report fake income].” (P. 19.) However, reporting fake income can explain only a minority (20 percent) of the rise in reporting implied by the authors’ regression discontinuity estimates. (P. 19.) The rest can be attributed to a decrease in under-reporting; that is, an increase in reporting of real self-employment income that otherwise would have gone unreported.

Finally, the authors explore two explanations for the increase in the pure reporting effect: EITC policy expansions that increased incentives to report, and possible changes in individuals’ knowledge of the incentives at stake. They reject the first explanation by looking at a significant EITC expansion in 2009; they find no discontinuity in reporting around that policy change. To explore the second, the authors build on earlier studies showing that the propensity to report exactly the amount of self-employment income that qualifies a taxpayer for the maximum benefit (known as “sharp-bunching”) has spread geographically and increased over time. They use the share of sharp-bunching behavior within 3-digit zip codes as a proxy for knowledge of EITC incentives and find that the propensity to report self-employment income in response to incentives grows significantly with greater knowledge.

In terms of implications, the authors position their results as a cautionary tale about over-reliance on administrative data as compared to survey data. Beyond methodological implications, however, I worry that this paper might be seized upon by those who seek to justify high audit rates of EITC recipients. I take the opposite view: the authors’ estimate that only 20 percent of the pure reporting effect was from outright fabrication (rather than reduced underreporting of real income) seems low, not high. It is evidence that individuals have learned over time how the EITC system works, and and that they overwhelmingly comply. This seems like a very good thing for the tax system. The credits are being delivered in the vast majority of cases as Congress intended because self-employment income that should have been reported in the first place is now being reported. This might help taxpayers form a habit of full reporting of self-employment income that will hold even when tax credits are not at stake. Moreover, the IRS should want to understand the process by which EITC knowledge has disseminated over time so it can try to use those same channels for encouraging uptake of other government programs.

One can only hope that interested policymakers might read this paper carefully before jumping to conclusions about tax credit policy. It would be well worth their time.

What We Lose with Digitalization and Automation of the Administrative State—and How to Get it Back

Sep 21, 2022 Diane RingAdd a Comment

Government, no less than the private sector, experiences both the pressures and the allure of digital technology and automation. New technology offers the promise and possibility of delivering services more efficiently, rapidly, and maybe equitably. But there is a distinct risk that, at least for some members of society, this new future provides even less service and fairness than the analog past.

It is that risk, and how we might confront it, that drives Sofia Ranchordás’ new article, Empathy in the Digital Administrative State. Looking specifically at the administrative state and its vast systems of decision making, Ranchordás contends that not only is “empathy” crucial in maintaining democracy and ensuring a system of just and evidence-based adjudication, but that empathy is actually declining with increased digitalization. Moreover, this decline most seriously impacts society’s vulnerable citizens. In Empathy, Ranchordás outlines the challenges faced by the vulnerable engaging with a digital and automated bureaucracy, reviews the existing literature on empathy in public administration, and offers ex post and ex ante empathy-based recommendations for improving the administrative state.

What precisely is the “empathy” that Ranchordás finds missing in the operation of the administrative state? She defines it as “the ability to acknowledge, respond [to] and understand the situation of others, including their challenges and concerns.” Thus, when facing a world in which not all citizens are equally positioned to engage with the digital administrative state and some individuals will be prone to committing mistakes or missing out on important information, Ranchordás believes that “empathy in government” can “close the gap” with “disconnected citizens.” But relying on empathy as a tool for the administrative state rightfully raises concerns about discretion exercised by government officials. Ranchordás recognizes this point but argues that the risks encountered with bureaucracies are increasingly those arising from our engagement with machines and not from our engagement with government officials. Furthermore, she contends that reliance on “empathy” as a tool in law and administration is not new. Ultimately, the article offers recommendations for ex ante and ex post incorporation of empathy into the digital administrative state.

On the ex ante side, governments are encouraged to both question and, where appropriate, limit the reliance on digital and automated engagement with government. Then-Commissioner of the Internal Revenue Service John Koskinen articulated this approach to technology developments in 2016 when he observed that although the IRS would be pursuing a range of innovations to enhance and improve taxpayer service, “[w]e recognize there will always be taxpayers who do not have access to the digital economy or who simply prefer not to interact with the IRS online. We remain committed to providing the services these taxpayers need.” Arguably too, recent reactions against proposed IRS reliance on third-party facial recognition technology to authenticate new online accounts, reflect related concerns. Although critiqued on the grounds of privacy and security, the proposed technology was also challenged for its likely impact on more vulnerable communities.

Ex post, Ranchordás encourages the administrative state to adopt “a duty to forgive and meaningfully assist citizens facing exceptional circumstances” which might include “severe illness, extreme poverty, or any personal challenge that can justify why a citizen is not able to act in a better way, defend their rights and interests, and comply with the law.” Certainly the more this approach is incorporated into a regime ex ante (for example, through use of multiple communication channels to reach individuals who may move location frequently, or through a legal provision granting individuals the right to appeal based on explicit categories of hardship) the less likely that discretion becomes an untenable power of the bureaucrats. But Ranchordás envisions ex post empathy in the administrative state that does “not amount to numerous individual exceptions that fully dismantle the efficiencies that automated systems may give rise to and create legal uncertainty.” Whether this balance can be achieved remains unclear.

Ranchordás’ interest in what happens to those in society who fail to thrive in the digital administrative state — those who make mistakes and miss opportunities to which they are entitled — resonates with earlier work that my co-author Shu-Yi Oei and I did in “Slack” in the Data Age. Our article considered the broader question of how increasingly ubiquitous data and new technological innovations now available to government and related enforcement activities renders everyone’s mistakes more visible but does so unevenly with the most vulnerable at the greatest and disproportionate risk of exposure. Here, Ranchordás takes aim specifically at the administrative state and its power to reduce some of the new risks facing the more vulnerable. How governments respond—and whether they can find a stable path forward with empathy—will shape our administrative systems in the age of digitalization and automation.

Tell Me a Tax Story

Aug 10, 2022 Daniel ShaviroAdd a Comment

As the saying ought to go, those who forget history are doomed to miss out on a lot of great stories. In Rebellions, Rascals, and Revenue: Tax Follies and Wisdom Through the Ages, Michael Keen and Joel Slemrod do their formidable best to save us from this dire fate. They also amply fulfill their aim of proving the truth of their opening quotation, from H.L. Mencken, to the effect that taxation is not just “eternally lively” but of greater interest than “either smallpox or golf.”

Keen and Slemrod are also so impressively comprehensive in their self-set task of combing thousands of years of history, across multiple continents, for enjoyable or illuminating tax anecdotes that I started to take it as a challenge. I read a lot of history books on the side. So, could I think of stories worth including that they had left out?

This did not go so well. Taxes as the subject of the Rosetta Stone? Check. Window taxes, salt taxes, beard taxes, and taxes on bachelors? Of course. Classic-era British rock lyrics complaining about high taxes? Everyone knows about the Beatles in “Taxman,” but what about the Who in “Success Story”? Or the Kinks in “Sunny Afternoon”? Yes, they have all three.

The only thing I was able to come up with that appears not to be in the text was Morton’s Fork. When the avaricious usurper Henry VII was king of England (after overthrowing fellow usurper Richard III), he sent the Archbishop Henry Morton on a tour of noble households, demanding fiscal contributions to the throne. Nobles had two distinct approaches to pleading poverty, but neither worked. Morton “reasoned that anyone who was living extravagantly was rich, and so could afford high taxes, whereas anyone who was living frugally had saved a lot, and so could afford high taxes.” Surely there is a parable lurking here about the complementarity of consumption taxes and wealth taxes.

The book’s rewards extend no less to the wide range of lessons learned, than to the wide range of delightful anecdotes. All too often, tax writers’ use of ancient history is drearily predictable. It comes as no surprise that the Cato Institute once ran an article entitled “How Excessive Government Killed Ancient Rome,” emphasizing how “steep taxes…severely depressed economic growth” in the Roman Empire (written by the great Bruce Bartlett before his work became extremely interesting). Likewise, the Business Insider tells us, courtesy of the self-proclaimed Sovereign Man, that “Taxes Brought Down the Roman Empire, and They’ll Do the Same to America.” This is all so routine that one is tempted to ask: Can I get fries with that?

Keen and Slemrod, however, are after far more diverse and interesting game. They use their examples to illuminate concepts ranging from deadweight loss, to Ramsey taxation, to tax incidence, to line-drawing, to interest group politics, to tax competition, to tax evasion versus avoidance, to the other type of kink (involving notches in the tax system).

Among the book’s virtues is its righteous commitment to verifying seemingly tall tales when possible, while debunking stories that perhaps ought to be true, but aren’t. For example, the Boston Tea Party responded not to outrageous colonial exploitation (which the British at the time were reserving for India) but to a quite modest levy, especially compared to the taxes the English were paying at home. That levy was in fact embedded in an overall after-tax price cut for tea, the proceeds from which were “earmarked for the defense of the colonies.” (P. 6.)

We also learn, however, that there are “disappointingly…few insights about the future of taxation to be gleaned from science fiction.” (P. 373.) The problem is that science fiction writers, while often so intellectually creative, have on this topic pretty much limited their thinking to imagining interplanetary tax revolts. How mundane, compared to such real-world examples as an Incan tax that was payable in head lice.

This is both a delightful and imaginative book, and a startlingly instructive and informative one. Despite all the humor, it is actually very serious in the best way. As Keen and Slemrod rightly tell us in the preface, “while rebellions will always be with us, taxes will always invite rascality [a well-chosen word that I have never previously seen in a tax article or book], and follies will always happen, we hope this book may bring a little more wisdom to the future of taxation.” (P. xviii.)

Bringing Law and Policy Back from the Black Hole of Efficiency-Based Analysis: Another Important Step Toward Refocusing on Justice

Jul 12, 2022 Neil H. BuchananAdd a Comment

Do the goals of fairness, equity, social justice, or other explicitly normative approaches to analyzing law and policy have any place at all in modern scholarship? Some scholars, especially those who approach the world from an orthodox economic viewpoint, have tended to reject categorically the very idea that such concepts should supplant their purportedly hard-headed analysis–an analysis that they hold out as being superior to supposedly “soft,” “sentimental,” “moralistic,” or “subjective” anti-orthodox approaches. Increasingly, however, equity-based analysis has at least been permitted as a component of most legal scholarly discussions. That itself is progress.

Even so, there continues to be a presumed distinction between self-styled “objective” approaches and the approaches of those who focus on inequality, domination, and other such fundamental questions of social justice. The familiar “equity-efficiency tradeoff” encapsulates this tension, the notion being that there are two distinct analytical categories that are not merely separate but in opposition to each other–-that is, the tradeoff says that we must sacrifice some efficiency if we desire greater equity, or instead that we must agree to doom more people to poverty if we seek to maximize efficiency. But is there a better approach? Happily yes, as Taxation and Law and Political Economy, by Professors Bearer-Friend, Glogower, Jurow Kleiman, and Wallace, clearly suggests.

The article outlines these familiar ideas and then takes some serious steps toward considering the strong conclusion that the efficiency concept is analytically incoherent. And although they stop short of embracing that idea fully, their new article admirably lays the groundwork for future scholarship (perhaps to be written by those authors themselves, individually or in various combinations) finally to embrace the conclusion that efficiency analysis is logically vacant. Their article does so many things well that I can hardly disparage them for not going as far as I think they should, especially because they go out of their way to be careful and modest in their conclusions.

The somewhat ungrammatical title of their article is a result of the authors’ engagement with a scholarly movement known as “Law and Political Economy” (LPE), which the authors rightly believe could be enhanced by including justice-based arguments drawn from legal tax scholarship. Hence the two “ands,” adding tax to an existing “and” canon.

The authors note (P. 527) that LPE scholars have argued that “market-centric analytic modes of legal thought dominant in recent decades have been inadequate to” the task of addressing the many crises facing the world today. Meanwhile, “tax scholarship has continuously engaged with the role of economic difference in the law,” which means that “LPE’s success in reorienting legal though [sic] will depend in part on its engagement with questions of tax and fiscal policy.” (P. 528.) Conversely, they argue that “[t]ax scholarship can benefit from LPE’s … skepticism of analysis premised on an autonomous market and that prioritizes efficiency and neutrality.” (Id.) It is that latter point–supposed market neutrality–that is the Achilles Heel of orthodox analyses and is thus the key to making progress toward the authors’ goals.

At times, the article is suitably bold, for example, arguing in conclusion that “[l]egal reforms that respond adequately to the current moment will require innovative and radical thinking.” Does this article do that, that is, does it engage in innovative and radical thinking? Innovative, yes. Radical, however, is more of a work in progress. Notably, the article’s only other uses of the word “radical” are in two footnotes (citing other other authors’ uses of that word) and twice above the line to describe other scholars’ proposals to impose unusually high tax rates on the rich. There are plenty of synonyms, of course, but the larger point is that the essence of the authors’ conclusions is somewhat disappointingly cautious.

Perhaps I am being unfair, however, as I am constructively critiquing an especially fine piece of work written by four academics, not all of whom yet have tenure. Were I their mentor, I would have agreed that caution is the order of the day. Beyond that, however, it is possible to read their analysis as an everything-short-of-saying-so invitation to others to draw the obvious conclusion that efficiency and neutrality are (and always have been) intellectual dead ends. Indeed, I think that that is the fairest way to read what they are doing in this article, because they so clearly expose what is wrong with the efficiency/neutrality orthodox approach. Importantly, Section III.B.2, “The Private Market as a Public Creation,” points to the breakthrough book by Liam Murphy and Thomas Nagel, The Myth of Ownership, which demonstrated that the notion of an autonomous economic market existing logically prior to law (and thus government) is incoherent.

After all, as the authors point out, “the tax system, like other areas of law, results from politically contingent policy choices, rather than the objective application of neutral or objective theoretical principles.” (P. 528.) Even so, their very next paragraph seems to back away from the obvious concluding step, instead offering what could amount to a balancing test: “This approach would recognize the value of efficiency-based frames, albeit when properly contextualized and subordinated to the supervening values that the LPE reorientation prioritizes.” (Id.)

But I use the phrase “seems to back away” here because, in light of the analysis in the article, being “properly contextualized and subordinated” to LPE’s rejection of market idolatry necessarily means doing what Murphy and Nagel and others (including me, in much of my own work) have done. That is, subordinating an efficiency-based frame is necessarily to reject efficiency as a primary guide to analysis. We can no longer view legal or policy analysis as either/or matters–the hoary efficiency/equity tradeoff–or even both/and approaches. Instead, it is at most a two-step hierarchical process: (1) identify our values and goals, and only then (2) decide how to achieve those goals in a way that upholds and advances them without causing ancillary effects that we view as unnecessary and undesirable.

For example, if we want to reduce inequality by imposing wealth taxes, we can dispense with the standard objection (“But that will be inefficient, because wealth is a legal right!”) and instead point out that the new legal rights that redistributive taxation will create are no less legitimate than those that they supplant. Instead, we proceed as the authors suggest. Step 1: Redistribute wealth to achieve goals of justice and equity; then Step 2: Choose the method of wealth distribution that improves the largest number of people’s lives.

In the end, this article constitutes an important step forward, arguing at the very least that the old orthodox approach that treats markets as autonomous and logically prior to law is no longer tenable (and, I would add, never was) and at most that what we used to think of as a co-equal goal of policy analysis–efficiency–is merely a secondary matter of choosing the most useful means to reach our chosen ends. I might even call that radical.