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Prevailing tax discourse rationalizes growing economic inequality. Using the example of state and local economic development “subsidy wars,” this article explores how conventional tax ideas present unequal sacrifice and risk as a public responsibility, driven by economic fact rather than unjust politics.

Over the last several decades, one contributing cause of inequality has been the escalating tax and spending incentives offered by local governments to attract private business investment. This competition operates to favor wealthy corporations over small businesses, without producing broad or lasting economic gains to communities, and it erodes resources for public education, infrastructure, social services, health care, and middle-class public sector jobs. Despite widespread criticism, this “race to the bottom” of austerity and inequality is normalized by tax ideas that imply governments inevitably must pay a steep market price for jobs in the competitive global economy. Conventional tax analysis identifies two primary goals: raising private revenue to “buy” public services or redistributing private revenue to address private disadvantages. That framing skews fiscal policies against the middle class as well as lower income citizens, by making government spending favorably to the non-wealthy appear to be profligate consumption or forced charity. In contrast, this neoliberal frame presents tax policies favoring wealthy elites as productive investment, given the assumption that public goods depend on private prosperity. That leads to fiscal policies that exacerbate rather than alleviate the problem that even middle class earnings and private savings are increasingly insufficient for health care, education, housing, and retirement. Instead, the tax frame should shift to recognize that democratic governments can collectively create capital and produce jobs to benefit ordinary citizens and non-wealthy communities without dependence on concentrated private capital.

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Fordham Law Review

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