Law and the New Dynamic Public Finance

The “new dynamic public finance” literature has generated important insights for the design of tax systems and social insurance programs in recent years. But with few exceptions, legal scholars in tax and related fields have yet to engage with the findings of dynamic public finance. This lack of engagement is unfortunate, both because insights from dynamic public finance can enrich legal analysis and because lessons from law can inform dynamic public finance research.  

 This lecture will explore the potential for cross-pollination between legal scholarship and dynamic public finance. It will address the design of age-dependent wage taxes, Social Security and disability insurance, the taxation of wealth and intergenerational wealth transfers, and constitutional aspects of tax law. Three themes emerge. First, dynamic public finance highlights circumstances in which tax interventions and legal technologies can be complementary. In these cases, the dynamic public finance literature may motivate legal scholars to refocus attention on decades-old challenges in legal policy design. Second, dynamic public finance also highlights circumstances in which tax interventions and legal technologies can be substitutes. For example, dynamic public finance points to the possibility that capital taxation against the background of social insurance can relieve pressures on privacy law and procedural due-process guarantees. Finally, and most importantly, insights from dynamic public finance can assist legal scholars and policymakers in designing tax-and-transfer mechanisms that more effectively reduce lifetime income inequality and intergenerational wealth gaps.