Assessing the Predistribution Revolution

• In Event: Redistribution in Theory and Practice

Abstract

There has been a reversal in both intellectual thinking and policymaking in recent years when it comes to the appropriate roles of the tax and transfer system versus legal rules, including regulatory policy tools. For some years, the dominant view–captured in the work of Louis Kaplow and Steven Shavell in key elements of the federal policy apparatus–had been that society should pursue distributional goals through the tax and transfer system, while deploying legal rules to maximize efficiency. There was then a concerted pushback–a revolution, if you will–both in the academy and in the policy arena. The result has been increased focus on achieving fairer “predistribution” through legal rules in addition to, or even in lieu of, “redistribution” through the tax and transfer system.

This article assesses the state of this revolution by focusing on how policymaking is playing out across several key policy areas and the tax and transfer system itself. Our overall assessment is that the revolution is not going well.

Under the title of predistribution or similar concepts, ideas are now being pursued across the political spectrum that sometimes run in direct contradiction to the stated distributional aims– with significant regressive effects–or that have inconsequential distributional effects, despite being described otherwise. And, that’s even as some of the policies probably come with significant losses in economic efficiency.

To better understand the state of the revolution and its effects, we explore case studies in predistribution-motivated policy shifts in several key areas: (1) industrial policy; (2) antitrust policy; (3) regulatory review in the White House; and (4) minimum wage policies. We then conclude with a comparison to tax and transfer policies in recent years and the ongoing attack on the fiscal state.

Based on these case studies and the assessment of U.S. tax and transfer policy, we describe how the question of tax and transfer versus legal rules is policy-area specific. There is probably not one right solution. But, in light of recent policy developments, there is more reason to be wary of predistribution as a policy aim. The poor results of the revolution so far reflect structural challenges in pursuing predistributional policies. The key challenges include that effects are indirect, and the effective tools are probably limited. There are exceptions to these poor results–the minimum wage for instance being one important one. Nonetheless, there has been too much magical thinking regarding predistributional policies, the blanket endorsement of which can serve counter-productive ends and shift focus away from defending and expanding the tax and transfer system.

Authors

• Rebecca Kysar, Fordham Law School

• David Kamin, New York University School of Law