Wednesday, November 11, 2009
Ruth Mason (UConn) presented Tax Expenditures and Federalism at the University of Toronto yesterday as part of the James Hausman Tax Law and Policy Workshop Series. Here is the abstract:
This Essay provides the first extended comparison of tax expenditures with federal grants to the states as devices for achieving particular federal policies. It examines the classic criticisms of tax expenditures and finds that in some cases grants are susceptible to the same criticisms as tax expenditures. For example, tax expenditures have long been criticized as inequitable because they usually distribute more benefits to higher income taxpayers. However, consideration of alternative grant programs reminds us that affluent suburbanites are likely to capture a disproportionate share of grant money provided to state governments. Likewise, whereas scholars have argued that certain tax expenditures disproportionately benefit whites, researchers have found race bias in the administration of federal grant programs. Thus, although tax expenditures may appear to be inequitable in isolation, comparing tax expenditures with realistic alternative policies provides a more balanced perspective. Analysis of other traditional criticisms of tax expenditures reveals similar insights.