This week, Doron Narotzki (Akron; Google Scholar) reviews Reuven S. Avi-Yonah (Michigan; Google Scholar), Taxation and Deglobalization, 80 Tax L. Rev. _ (forthcoming 2027).

Reuven Avi-Yonah’s new article focuses on one of the more difficult questions in tax policy: now that the era of hyper-globalization seems to be ending, what should tax systems do about it? Avi-Yonah argues that deglobalization, for all its evident costs in the form of higher inflation, reduced output, and the risk of a global recession, creates an opportunity to rebuild the strained social safety net by taxing the rich and multinational corporations in ways that until recently were difficult because capital, corporations, and wealthy individuals could easily move. The organizing framework is the trilemma among globalization, tax competition, and the social safety net.

The article traces how globalization from 1980 to 2016, with the 1984 repeal of the portfolio interest withholding tax as an early milestone, eroded countries’ ability to tax mobile capital and fueled a race to the bottom, and how the OECD’s BEPS project arrived as “too little, too late.” His assessment of BEPS 2.0 is also strong: Pillar One was unlikely to succeed because it required U.S. Senate ratification, and while Pillar Two endures because more than fifty countries have agreed to it, its structure is fundamentally flawed because it is territorial. The QDMTT turns off the IIR and the UTPR, while the substance-based income exclusion and qualified refundable tax credits allow tax competition to continue. The U.S. rules, GILTI and the CAMT, are global and grant only a foreign tax credit, which in Avi-Yonah’s view makes them tougher and superior.

The article then traces deglobalization through three areas: tariffs, including the collapse of WTO dispute resolution, the surge in average U.S. effective tariff rates from approximately 2.5% in early 2025 to between 10% and 13.7%, and the restructuring of tariffs following the Supreme Court’s Learning Resources decision; restrictions on immigration; and a potential revival of exchange controls, which technology and information-reporting systems such as FATCA and the CRS have made enforceable in ways once thought impossible.

The heart of the article is its discussion of the opportunities created by deglobalization, and I find its first proposal to be the most creative contribution. Avi-Yonah shows how Congress could construct the functional equivalent of a 10% subtraction-method VAT without formally adopting a VAT, which is probably politically untenable in the United States. The process would be to reduce the FDDEI rate to zero and extend it to all export income, allow full expensing, eliminate the corporate interest deduction, impose a 10% tariff on imported goods and a 10% DST on imported services, and tax wages at 10% at the individual level. Using a simple grower-winemaker-retailer example, he walks the reader through why this combination roughly replicates a destination-based VAT. The stakes are high: at approximately $100 billion per percentage point under some estimates, a 10 percent VAT equivalent could raise about $1 trillion per year.

The House Republican DBCFT proposal serves as proof of concept that VAT principles can be embedded in an income tax framework, and Avi-Yonah argues, persuasively I think, that the two objections that helped defeat the DBCFT, lobbying against the denial of import deductions and WTO concerns, have lost some of their force now that tariffs enjoy presidential and bipartisan support and the WTO’s enforcement power has been gutted, largely by the United States itself.

The second proposal is a progressive corporate tax applied on a global basis, modeled on the CAMT, with rates as high as 80 percent on profits above $10 billion, which was also the top rate under the World War II excess profits tax. What makes this more than a provocation is the supporting analysis. Drawing on Edward Fox’s and Laura Power and Austin Frerick’s findings that the corporate tax now falls mostly on supernormal returns, and on the 1909 corporate tax’s original antitrust purpose, which Avi-Yonah documents through Taft’s own message to Congress, he recasts the corporate tax as a tool to capture monopoly rents, including algorithmic tacit-collusion rents.

His most intriguing argument is that the AI revolution may be reanchoring part of the corporate tax base. Although AI and the intellectual property associated with it remain highly mobile, developing advanced AI requires enormous investments in data centers and related physical infrastructure. Once constructed, those facilities are difficult to relocate, and their location is influenced by access to energy, skilled workers, established AI ecosystems, and national-security considerations. Avi-Yonah therefore argues that the physical infrastructure underlying AI may expose multinational corporations to taxation in ways that the earlier digital economy did not. This is of course plausible, although ultimately is difficult to assess in an industry evolving as rapidly as AI. Technological change, new infrastructure models, and shifting energy and regulatory constraints may alter where and how advanced AI is developed, making this an important but necessarily provisional part of the article’s broader thesis.

The third proposal argues that other high-tax countries should adopt U.S.-style citizenship-based taxation, backed by FATCA or CRS enforcement and a tougher exit tax, as the answer to proliferating non-dom regimes. Avi-Yonah is candid that he has argued against nonresident citizen taxation in the past, but maintains that conditions have changed. In a deglobalizing world, the right of entry becomes the crucial benefit of citizenship, which in his view means Cook v. Tait was right in 1924 and is right today, although not for the reasons the Court gave.

The argument is persuasive, but not beyond challenge. An 80 percent rate, even one confined to mega-profitable firms, will strike many readers as politically remote, and the coalition-building the VAT equivalent requires may be harder than the article suggests, a difficulty Avi-Yonah himself acknowledges. One might also note that the report he quotes lists “strong data center incentives” and “favorable tax policies” among the reasons data centers cluster in particular states, so whether immobile infrastructure will translate into tolerance for dramatically higher tax rates remains an open question, and the author is honestly clear that this is a second-best world: it would have been better to solve the trilemma through meaningful limits on tax competition while multilateral institutions were still strong.

Overall, this is a strong contribution by Avi-Yonah: sweeping in scope, grounded in history, and unafraid of ambitious proposals. The article turns a moment that most tax scholars view with alarm into a constructive policy agenda, and for this alone it deserves a wide readership among academics, policymakers, and practitioners trying to understand what comes after globalization.

Here is the rest of this week’s SSRN tax roundup: