When we think of sovereignty, we often imagine the realist, Hobbesian, and anarchic perspective of competing states, each autonomous and authoritative over its own territory. This idea of sovereignty builds upon social contract theory – the notion that individuals come together for utility and security, agreeing to surrender some of their freedoms to a central government. Taxation is central to this theory.
Citizens agree to relinquish some of their financial sovereignty in exchange for state protection. Sovereignty, therefore, is transferable, from individual sovereignty to state sovereignty, and, likewise, from national to international. International institutions and alliances are amalgamations of transferred sovereignty, bearers of an authority granted to them by state participants. But does state participation reflect a citizen’s social contract? Scholars have been asking this question for a long time, notably since Kant’s Perpetual Peace Theory, but more critically since the creation of the United Nations. Sovereignty has been transferred far from its origins in individual liberty – perhaps even leaving the bounds of the ‘consent of the governed’. But is this an irresolvable challenge? I will briefly explore the question through the lens of taxation.
In December 2021, the Organization for Economic Cooperation and Development (OECD) published model rules for the incorporation of a global minimum tax. By August of this year, 65 countries had introduced legislation that would transpose these tax rules into their national laws. Notwithstanding this effort to harmonize tax rules and increase tax revenues, the United States, in January 2025, issued the following statement: “[The Global Tax Deal] not only allows extraterritorial jurisdiction over American income but also limits our Nation’s ability to enact tax policies that serve the interests of American businesses and workers.”
Essentially, the Trump administration argues that the deal compromises American sovereignty and economic competitiveness. On one hand, the OECD proposal would mark a win for international cooperation, for the elimination of tax avoidance, and for enforcing corporate social responsibility. On the other hand, it changes the rules of international tax competition, constraining governments in their capacity to provide fiscal incentives for investment. Thus, U.S. protectionism and claims on sovereignty are inextricably linked.
This is not a new issue. The U.S. challenged the creation of the International Criminal Court, seeking exceptions for American citizens. It also left the Paris Climate Accords partly to retain sovereign independence. The rocky relationship between the United States and international institutions reflects one of its core declaratory statements: that all “men” are endowed with a right to liberty. Indeed, one of the causes for revolution was that the king imposed taxes without “our consent.” U.S. Rep. Kevin Hern echoed this sentiment in June 2025, saying that the global tax deal is “taxation without representation on steroids, a direct threat to our economic sovereignty.” Ironically, as the government shut down, Americans can ask themselves whether they are truly being represented anyway, whether their money is being budgeted well.
While universal tax rules may seem helpful for today’s economically interconnected world, developing countries are most at risk of losing competitiveness. The OECD’s global tax seeks to return revenues to the ‘home country’, i.e., where the parent company is based – usually a rich nation. This curbs profit shifting but could reduce foreign direct investment to developing nations. The theoretical implications regarding developing states are still widely debated. In the EU, however, all member states have signed onto the agreement, with some choosing to delay implementation. Yet, as German economist Roland Vaubel warned in 1986, naïve internationalism often comes at the expense of the citizen. Progressive European views are still wrestling with the loss of national sovereignty in submission to the EU. For example, EU Parliamentarian Damian Boeselager has been a prominent advocate of making the “EU a true parliamentary democracy,” meaning that the EU ought to become more federalized like a “United States of Europe.” This call for federalism and increased representation is contrasted by the same impetus for increased national sovereignty from European far-right movements.
At the level of an individual citizen, there will always be the desire to preserve sovereignty and affirm the social contract. Yet there is often an equal urge at the national and international levels to streamline channels of cooperation, centralize power, and prioritize interests. Can tax choice offer a solution to the dilemma of transferred sovereignty?
Imagine if taxpayers set the U.S. federal budget when they filled out their tax forms – maybe the government shutdown could have been avoided. Imagine if citizens could decide whether they wanted to fund USAID or not. Imagine a system of tax where, with a 10 percent non-discretionary baseline, taxpayers could decide where to allocate an additional 2 percent (i.e., a tax rate of 12 percent, with 2 percent available for direct appropriation). This would democratize tax systems and partially democratize regimes, as governments would be more directly accountable to citizens’ budget demands.
There is an array of questions that arise. For example, would tax allocations be general or specific? The theoretical implications for international relations should be apparent, however. International collective governance is too far removed from individual public choice. This could be partially resolved if citizens held more tax sovereignty at the national level. By transferring national sovereignty to citizens through tax choice, citizens would bridge directly to international institutions. This would globalize citizens, granting them more say in international policymaking. In other words, by granting more fiscal decision-making power to citizens, citizens can be involved in the process of consent to international institutions.
Consent of the governed would not be simply a consent to a national government; instead, citizens, as the national governors, could decide to consent to be governed under international treaties and organizations. This could empower individuals in a world where international decision-makers seem far removed from those they regulate. Globalization’s march towards universal polity should be conjoined with a reclamation of individual sovereignty. This can happen through means of ‘tax choice’ at the domestic level and eventually at the international level, so that taxation can truly promote justice and the common good on a global scale.
Edited By: Sydney Bardley-Black