Many emerging companies' business models center on helping consumers to share assets in new ways. This “sharing economy” has already experienced tremendous growth and attracted considerable investment capital and talent. Yet, as is often the case with economic innovations, existing...

This chapter considers the relationship between the U.S. federal income tax system and innovation, using the sharing economy as a focal point for analysis. It makes two main points. First, the tax system is currently a questionable tool for encouraging innovation. Regulators are understandably...