LAW, TAXES, INEQUALITY, AND SURPLUS.

In this contribution to the Boston University Law Review Symposium on Law, Markets, and Distribution, I introduce an important new exception to the presumption that the tax system is superior to the legal system as a tool to redistribute wealth. When legal rules are used to divvy up a surplus, there is no a priori reason to prefer the tax-and-transfer system over the legal system to address inequality. This is the "surplus-sharing exception." This surplus-sharing exception is noteworthy for two reasons. First, because surplus is ubiquitous, the surplus-sharing exception represents a major caveat to the presumption that the tax system is superior to the legal system as a tool to redistribute wealth. Second, and more specifically, surplus-sharing laws that regulate market transactions are a particularly useful pathway through which the legal regime can divvy up surplus, and so laws that regulate market activity are often superior to the tax-and-transfer system as a way to address inequality. The discussion begins with a concrete example illustrating why a tax-andtransfer approach is not presumptively more efficient than legal rules as a way to address inequality when the task involves divvying up a surplus. [ABSTRACT FROM AUTHOR]