The Integration of Tax and Spending Programs
David A. Weisbach
University of Chicago - Law School; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP)
Bar-Ilan University - Faculty of Law
September 1, 2003
Yale Law Journal, Vol. 113, p. 955, 2004
U Chicago Law & Economics, Olin Working Paper No. 194
This paper provides a theory for deciding when a spending program should be implemented through the tax system. The decision is traditionally thought to be based on considerations of tax policy. The most common theories are the comprehensive tax base theory and the tax expenditures theory, both of which rely on tax policy to make the determination. We argue instead that the decision should be based solely on consideration of organizational design. Activities should be grouped together in a way that achieves the best performance, much like a corporation decides how to divide its business into divisions. Tax policy is entirely irrelevant to the decision. This paper begins the process of applying organizational design theory to the tax and spending problem, considering theories of hierarchies based on the needs for specialization in and coordination of activities. The paper then analyzes whether food stamps and the earned income credit should be implemented in through the tax system based on this analysis.
Number of Pages in PDF File: 74
Keywords: tax policy, tax base theory, tax expenditures theoryAccepted Paper Series
Date posted: September 9, 2003 ; Last revised: January 4, 2012
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