TaxProf Blog

Kimberly A Clausing (UCLA; Academic google), Taxes on capital and market power:

In recent decades, market power has increased substantially, according to multiple measures describing industry concentration, markups, and business profitability. While market power can generate benefits, it also raises vexing policy concerns, including the potential for adverse effects on labor markets, income inequality, and the dynamism of market competition. The concept of market power also has implications for how we conceptualize income from capital, so it is important to distinguish between normal and above-normal returns on capital. The tax system taxes both types of capital income, but often imperfectly and incompletely. Full consideration of the relationship between market power and capital income suggests important implications for the optimal design of capital taxes, including the role of entity taxes, the use of graduated business tax rates, and reform international prosecutor.