APEX Conference Brings Economists, Political Scientists, and Legal Scholars Together to Chart a Fairer U.S. Tax System

As Americans prepare their tax returns in advance of next month’s deadline, some might wonder what to expect following passage of last year’s One Big Beautiful Bill Act (OBBBA). The law contains hundreds of provisions, including the permanent extension of the tax cuts Republicans passed in 2017 and major cuts to Medicaid and other social safety net spending.

But the law’s details and the tax code as a whole reveal more than what an individual owes the government in taxes. At the Yale Institution for Social and Policy Studies’ American Political Economy eXchange (APEX), research shows how tax policy, inequality, and democratic capacity interact, as economic concentration fuels political power imbalances. Which in turn shape who pays what every April 15.

“Tax systems tell us where market power resides, which incomes matter, and how public wealth can be built,” said Jacob Hacker, APEX director and Stanley Resor Professor of Political Science at Yale. “We should judge such policies by whether they build democratic capacity and endure. And we should favor reforms that are credible, meaningful to everyday Americans, and self-reinforcing over time.”

Late last month, economists, legal scholars, political scientists, and policy experts gathered at ISPS for an APEX conference to explore the latest research and developments affecting tax policy.

Hacker and Patrick Sullivan, an ISPS postdoctoral associate with APEX, organized the conference as a sequel to one in September 2024 about tax policy and the stakes of the election.

“We are in a remarkable moment,” Hacker said to introduce the conference. “Not just in the United States, but globally, with regard to the transformation of the economy and society and the transformation of public policy.”

APEX unites scholars studying the interaction of economics, politics, and policymaking to clarify how public policies both shape and are shaped by democratic institutions.

In six sessions across two days, three themes emerged:

• Tax systems reveal concentrations of economic and political power.
• The richest forms of income increasingly escape annual taxation.
• Durable reform must combine credible enforcement, public transparency, and benefits visible to everyday citizens.

Attendees regularly referenced rising inequality, noting that the extraordinary concentration of wealth at the highest level has far outpaced policy responses, particularly in the United States.

Since 1980, the share of income going to the top 1% of earners in the United States has roughly doubled, while the share going to the bottom 50% has fallen. The 10 richest Americans’ combined wealth has grown from $300 billion in 2010 to $2.6 trillion, Hacker said, with Elon Musk alone worth near $800 billion at one point.

Hacker noted how lack of “predistribution” — initiatives aimed at curbing income inequality by addressing its root causes before it arises — contribute more to inequality than reallocating wealth after it has been generated.

And the OBBBA, which primarily benefits the country’s highest earners and corporations, passed with votes from senators representing only 41.7% of the country’s population.

Sullivan presented research he co-authored with Hacker on passage of the bill. He said Republicans relied on populist provisions such as eliminating taxes on tips to distract from regressive components. In addition, they denied that they were cutting funding for Medicaid and the Supplemental Nutrition Assistance Program (SNAP); framed cuts as waste, fraud, and abuse; and framed cuts as individual choice, particularly through work requirements.

Sullivan noted that work requirements were timed to kick in after this November’s Congressional midterm elections, minimizing short-term political risk. And survey experiments showed that when people saw the full picture — including both taxes and spending cuts — they turned sharply against it. Even Republican voters, who usually support tax cut packages.

“This bill was perhaps unsurprisingly very unpopular,” Sullivan said. “Basically, the most regressive piece of budget legislation in living memory.”

David Hope of King’s College London presented new work with colleagues on how public attitudes respond after people learn that the richest 400 Americans pay lower total tax rates than all other income groups. They found support for taxing the rich increases when respondents learn about such regressivity but also that support for taxing the middle class decreases, an effect driven almost entirely by shifts in perceptions of the fairness of the U.S. tax system.

“This is the hidden cost of tax regressivity at the top,” Hope said, “it may undermine support for broad-based taxation.”

Kris-Stella Trump of Johns Hopkins University discussed a survey study co-authored with Felix Jäger of the University of Konstanz, showing that people do not meaningfully distinguish between “wealthy,” “rich,” or “high-income” individuals. She highlighted a potential political implication: that proposals for taxing wealth may be intuitively perceived as creating “double taxation”, given that incomes are already taxed.  

Serena Laws of Trinity College found that while many low-income wage earners know they receive the Earned Income Tax Credit, they often misunderstand why, conflating it with the Child Tax Credit or attributing eligibility to disability or unemployment. This dynamic complicates expectations that tax-delivered benefits build trust or political support.

“People are actually more aware of the EITC than I expected,” Laws said. “But that does not necessarily mean they understand it.”

Other scholars explored corporate taxation, the erosion of effective tax bases, and the relationship between multinational profit shifting, political economy, and democratic governance.

Sarah Godar of DIW Berlin and the EU Tax Observatory, presented empirical results from European Union corporate tax reforms from 2014 to 2022. She discussed how governments did not just cut rates but added narrow tax breaks for investment, research, and intellectual property that lowered effective tax rates — the share of pre-tax income that companies pay in taxes.

And yet inequality in Western European did not grow as large as in the United States since 1980, demonstrating how policies and not fate or ungovernable forces can help explain the pattern.

Other scholars stressed how today’s tax system often misses the richest income because of unrealized gains on unsold assets such as stocks and real estate, retirement account growth, and company structures such as partnerships that do not pay corporate taxes themselves but pass through to the owners’ individual tax returns. Such gains have become a huge share of income for the wealthiest people.

Michael Graetz, Justus S. Hotchkiss Professor Emeritus of Law and Professorial Lecturer in Law at Yale Law School, argued in favor of taxing large partnerships as corporations. Partnerships with more than $100 million in assets have an average of 530,000 owners, Graetz said. And yet the IRS audits only 0.27% of such partnerships.

Conference attendees proposed limiting interest deductions so companies cannot use debt to erase taxes, re-drawing rules for intellectual property, and pairing U.S. actions with a global minimum tax that cannot be gamed.

In addition, they called for rebuilding the IRS and increasing transparency, making the Child Tax Credit fully refundable so low-income families get the full amount even if their income tax bill is zero, and restoring the Earned Income Tax Credit boost for childless workers.

Done well, conference participants said, tax reform can immediately restore progressive structure in which richer people owe higher rates, gradually reduce concentration of wealth, and make investments that leave future markets and the balance of democracy itself less unequal than today.

Hacker stressed how reformers should aim for predistribution and durability: change market rules (not only after-tax redistribution) and design taxes that build trust and stick, with visible earmarks and credible enforcement so the next debate cannot be framed as “raising middle-class taxes.”

“The challenge is designing tax policy that actually lasts,” Hacker said. “That builds trust rather than eroding it.”