Glogower Presents Taxes By Omission Online Today At Toronto

Ari Glogower (Ohio State) presents Taxes By Omission virtually at Toronto as part of its James Hausman Tax Law and Policy Workshop Series:

This Article introduces the term “taxes by omission”—private costs incurred by taxpayers resulting from the non-provision by the government of goods or services—and considers its implications for economic inequality, tax progressivity, and the distributional analysis of tax reforms. For an example of taxes by omission, proponents of universal government-provided healthcare in the U.S. have recently argued that a reform package of tax increases used to fund broadened government-provided healthcare would not result in a net tax increase for middle-income beneficiaries, since the beneficiaries are already taxed under current law when they incur costs for private healthcare. Others characterized these private healthcare costs as taxes when evaluating the progressivity of the taxes and spending and argued that the overall system is likely regressive after accounting for these private costs that could instead be provided by the government.

The rational underlying taxes by omission reflects the basic logic in the literature on methods of distributional analysis. The prior literature explores in detail how certain definitional choices can affect distributional analysis. These choices include how and when to account for (1) the equivalence of both tax and nontax benefits and burdens (2) the combined effects of both tax and nontax revenue and spending programs, and (3) the taxpayers’ baseline entitlements and obligations when evaluating the benefit and burdens of taxes and government spending. The prior literature typically considers each of these choices in evaluating the distributional consequences of government action, such as imposing taxes or providing benefits.

Taxes by omission reflects elements of the logic from each of these familiar paradigms, but
also adds an additional dimension to distributional analysis by also accounting for government inaction, when it does not assume costs for goods and services borne by the taxpayer. This alternative perspective provided by taxes by omission has distinct implications for the measurement of inequality, tax progressivity, and the distributional analysis of tax reform.

In principle any private cost borne by a taxpayer could be recharacterized as a tax by omission. The Article also describes possible limiting principles for determining when the concept of taxes by omission should or should not inform distributional analysis.