Paul L. Caron

Wednesday, March 2, 2022

Speck Presents Transforming Tax Expenditures Today At Toronto

Sloan Speck (Colorado; Google Scholar) presents Transforming Tax Expenditures at Toronto today as part of its James Hausman Tax Law and Policy Workshop:

Sloan-speckSince the 1960s, reformers have advocated the repeal of tax expenditures—disguised government spending through preferences in the Internal Revenue Code. And yet, tax expenditures persist, impairing federal tax receipts by more than $1.3 trillion annually. This Article introduces a novel mechanism for tax expenditure reform. If statutory repeal proves impossible, lawmakers can achieve a similar de facto result through a strategy of anti-repeal. By radically expanding a tax expenditure’s scope, then adjusting progressive income tax rates to account for revenue loss and distributional considerations, lawmakers can effectively eliminate tax expenditures from the tax base and integrate them into the rate structure—a process this Article defines as “base-rate transformation.”

Base-rate transformations offer lawmakers an alternative that complements conventional repeal and reform proposals. From a normative perspective, base-rate transformations facilitate a continuous range of policy outcomes and encourage optimization under constraints—factors that conventional approaches to tax expenditures often underemphasize. Base-rate transformations also implicate a different political economy from conventional proposals, which may unlock new pathways towards reform. Perhaps counterintuitively, these new pathways can advance traditional tax policy values of equity, efficiency, and simplicity. More generally, base-rate transformations challenge standard framings of tax expenditures and force a more holistic approach to those provisions’ reform.

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