The best way to regulate the tech giants is to tax the immense scarcity rents they generate. Instead of doing that, the Biden Administration has gone all-in on antitrust action, which can’t touch those scarcity rents, even if antitrust action does succeed at making tech markets more competitive, which is unlikely.
When I make this point, people tell me: “don’t worry! Taxation and antitrust action aren’t mutually exclusive. The Biden Administration is also pro-tax.”
Well, is it?
The Canadians are planning on taxing the tech giants, and instead of rushing to complement this sound policy, by imposing our own tax, the Biden Administration is threatening to retaliate if they don’t scupper their plans.
An administration, like everything else, has a budget constraint, denominated in attention as well as dollars. If it is going all-in on one thing, it’s not going all-in on another.
And to go all-in on one policy, an administration may need to reject others in order to maintain the coherence of the one it favors, which seems to be happening here. The Biden Administration is complaining that it’s unfair for Canada to single out American tech companies for taxation, something that would have less bite if America were singling them out itself.
So, please don’t tell me that yes, you agree that antitrust probably can move the needle only very slightly, if at all, but why not try it anyway?
If you’re trying it, you’re not trying the stuff that actually works.