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Is corporate tax competition a threat to democracy in the EU? The answer depends crucially on a positive analysis of the effects of tax competition on national policy autonomy. Most analyses focus on direct effects on corporate tax rates and revenues. We contend that this focus is too narrow. It overlooks the fact that corporate tax competition also has important indirect effects on the progressivity and revenue-raising potential of personal income taxation. We elaborate on these indirect effects theoretically and empirically, and explore the implications for the normative debate on the EU's democratic deficit. Our findings show that European integration can constrain national redistribution in a major way: the democratic deficit is real. Greater political contestation over the EU's policy agenda is desirable in order to mitigate this deficit.

Date written: February 21, 2020 ; We argue that the independent agency of EU institutions can serve not only to tie the member states to previous policy commitments, as argued in the extant literature, but also to untie member states from commitments that have become outdated and harmful. The European Central Bank saved the Euro in 2012 not by enforcing the monetary financing prohibition or the no-bail-out clause of the Treaty more strictly but by flouting them. We develop our de-commitment account of supranational agency theoretically, show its workings empirically by a case study of the Eurozone crisis, and discuss its scope conditions. We surmise that supranational de-commitment is a common feature of EU politics.

AbstractThe Eurozone crisis and the refugee crisis are showcases of the problems associated with the EU's shift from market integration to the integration of core state powers. The integration of core state powers responds to similar demand factors as market integration (interdependence, externalities and spillover) but its supply is more tightly constrained by a high propensity for zero‐sum conflict, a functional requirement for centralized fiscal, coercive and administrative capacities, and high political salience. We show how these constraints structured the initial design of Economic and Monetary Union and of Schengen, made them vulnerable to crisis, and shaped policy options during the crises: they made horizontal differentiation unattractive, re‐regulation ineffective, centralized risk and burden‐sharing unfeasible, and the externalization of adjustment burdens to non‐EU actors necessary by default. In conclusion, we explore possible escape routes from the trap.

The Eurozone crisis and the refugee crisis are showcases of the problems associated with the EU's shift from market integration to the integration of core state powers. The integration of core state powers responds to similar functional demand factors as market integration (interdependence, externalities and spill-over) but its supply is more tightly constrained by a high propensity for zero-sum conflict, a functional requirement for centralized fiscal, coercive and administrative capacities, and high political salience. We show how these constraints structured the initial design of EMU and Schengen, made them vulnerable to crisis, and shaped policy options during the crises: they made horizontal differentiation unattractive, re-regulation ineffective, centralized risk and burden sharing unfeasible and the externalization of adjustment burden to non-EU actors necessary by default. In conclusion, we explore possible escape routes from the trap.

We map the pattern and extent of the European integration of core state powers (coercive force, public finance, and public administration) and analyze causes and consequences. We highlight two findings: First, in contrast to historical examples of federal state building, where the nationalization of core state powers precipitated the institutional, territorial and political consolidation of the emerging state, the European integration of core state powers is associated with the institutional, territorial and political fragmentation of the EU. Second, in contrast to European market integration, state elites and mass publics, not organized business interests, are the prime drivers of integration.