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Tax “Expenditures” and Welfare States: A Critique

Published online by Cambridge University Press:  27 April 2011

Monica Prasad*
Affiliation:
Northwestern University

Abstract

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Type
Critical Perspectives
Copyright
Copyright © Donald Critchlow and Cambridge University Press 2011

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References

NOTES

1. Surrey, Stanley S., “Tax Incentives as a Device for Implementing Government Policy: A Comparison with Direct Government Expenditures,” Harvard Law Review 83 (1970): 705–38CrossRefGoogle Scholar; Surrey, Stanley S., Pathways to Tax Reform (Cambridge, Mass., 1973)CrossRefGoogle Scholar; Lubick, Donald C., “A View from Washington,” Harvard Law Review 98 (1984): 338–40.Google Scholar

2. Pozen, David, “Tax Expenditures as Foreign Aid,” Yale Law Journal 116 (2007): 869–81, 877–78.CrossRefGoogle Scholar

3. Howard, Christopher, The Hidden Welfare State: Tax Expenditures and Social Policy in the United States (Princeton, 1997).Google Scholar

4. Ibid., 9.

5. Hacker, Jacob, The Divided Welfare State: The Battle over Public and Private Social Benefits in the United States (Cambridge, 2002).CrossRefGoogle Scholar

6. See Howard, The Hidden Welfare State, 191.

7. Howard, Christopher, “Making Taxes the Life of the Party,” in The New Fiscal Sociology, ed. Martin, Isaac, Mehrotra, Ajay, and Prasad, Monica (Cambridge, 2009).Google Scholar

8. Pozen, “Tax Expenditures as Foreign Aid.”

9. Stead, Meredith, “Implementing Disaster Relief Through Tax Expenditures,” New York University Law Review 81 (2006): 2158–91.Google Scholar

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13. Surrey, Stanley S., “Tax Incentives as a Device for Implementing Government Policy: A Comparison with Direct Government Expenditures,” Harvard Law Review 83 (1970): 705–38, 717.CrossRefGoogle Scholar

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15. Murphy and Nagel’s core argument is that “the modern economy in which we earn our salaries, own our homes, bank accounts, retirement savings, and personal possessions, and in which we can use our resources to consume or invest, would be impossible without the framework provided by government supported by taxes” (emphasis added, Murphy, Liam and Nagel, Thomas, The Myth of Ownership: Taxes and Justice [New York, 2002])CrossRefGoogle Scholar—in other words, that taxes are justified because they provide benefits to the society at large.

16. I am grateful to an anonymous reviewer for these points.

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19. It should be noted that the EITC applies only to those with an income; however, this is an administrative feature of this particular policy, not a feature inherent to refundable tax preferences.

20. Stead, “Implementing Disaster Relief Through Tax Expenditures,” 2165–66.

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22. Ewald, François, L’État-providence (Paris, 1986).Google Scholar An older intellectual lineage is suggested for this thought in Robert Frost’s 1947 “Masque of Mercy,” which hints at early twentieth-century unease over the collectivization of risk: “The thing that did what you consider mischief…. Was the discovery of fire insurance.” See Collected Poems (New York, 1969), 505–6.

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25. Scholars might also argue that collecting revenues and then distributing them creates state capacity—that is, it creates organizations that acquire expertise in certain kinds of activities, and it creates a set of people with interests that are not reducible to social interests. Those independent interests can have causal effects of their own, and that expertise can be redeployed in other ways. However, the same could be said of the bureaucracies that enforce taxation and tax preferences: reducing taxes in targeted ways requires policing to ensure that citizens are not overstepping the stated limits of the legislation, and these bureaucracies may have similar social effects as welfare bureaucracies.

26. Howard, “Making Taxes the Life of the Party,” 96.

27. Ventry, Dennis, “The Collision of Tax and Welfare Politics: The Political History of the Earned Income Tax Credit, 1969–99,” National Tax Journal 53 (2000): 983–1026CrossRefGoogle Scholar; Pamela Herd, “The Fourth Way: Big States, Big Business, and the Evolution of the Earned Income Tax Credit,” paper presented at the annual meeting of the American Sociological Association, Boston, 2008.

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30. Of course, no welfare state completely avoids, or wishes to avoid, reinforcing market processes (see, e.g., Korpi, Walter and Palme, Joakim, “The Paradox of Redistribution and Strategies of Equality,” American Sociological Review 63 [1998]: 661–87).CrossRefGoogle Scholar But there are differences in degree that have important consequences for the level of poverty and inequality in a society.

31. Wilensky, Harold, Rich Democracies (Berkeley and Los Angeles, 2002)Google Scholar; Prasad, Monica, The Politics of Free Markets (Chicago, 2006).Google Scholar

32. Milton Friedman to William F. Buckley Jr., 26 April 1974, Box 22, folder 22.13 “Buckley, William F., Jr.,” Milton Friedman Papers, Hoover Institution, Stanford.

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36. Adema, Willem, Net Social Expenditure, 2nd ed., Labour Market and Social Policy, Occasional Papers No. 52 (Paris, 2001), OECD.CrossRefGoogle Scholar

37. Price V. Fishback, “Social Welfare Expenditures in the United States and the Nordic Countries: 1900–2003,” National Bureau of Economic Research, Working Paper 15982, http://www.nber.org/papers/w15982.

38. Fishback, Price V., “Who Spends More on Welfare: The United States or Sweden?” Freakonomics Blog, http://freakonomics.blogs.nytimes.com/2010/05/25/who-spends-more-on-social-welfare-the-united-states-or-sweden/.Google Scholar

39. Schulz, Nick, “The U.S. Is More Compassionate than Sweden?” The Enterprise Blog, http://blog.american.com/?p=14244Google Scholar; Wilkinson, Will, “America’s Nordic-Sized Welfare State,” Will Wilkinson, http://www.willwilkinson.net/flybottle/2010/05/25/americas-nordic-sized-welfare-state/.Google Scholar

40. Monica Prasad, The Politics of Free Markets; see also Monica Prasad, The Land of Too Much, forthcoming.