Federalism and the Taxing Power

62 Pages Posted: 22 Apr 2011 Last revised: 27 Feb 2013

See all articles by Ruth Mason

Ruth Mason

University of Virginia School of Law

Date Written: December 1, 2010


Scholars and courts recognize that the federal government uses its broad spending power to enlist states in achieving federal goals, thereby expanding the federal government’s reach beyond the areas enumerated for it in the Constitution. Similarly, the federal government can achieve similar ends — it can regulate the states and private parties — through its potentially equally broad taxing power. This Article draws on the spending power literature to illuminate the analogous federalism concerns raised by expansive use of the taxing power. For example, by crowding out state regulation of similar policy areas, federal tax regulation may limit policy diversity and hinder regulatory competition both among the states and between the states and the federal government. But this Article also identifies important differences between taxation and grants that suggest that federal tax regulation represents less of a federalism threat than do conditional grants to the states. For example, because federal tax incentives neither contractually bind states to follow federal policy nor expend state legislative and administrative resources in enacting and enforcing federal policy, states may remain freer under tax incentives than grants to enact concurrent or contrary policies.

Keywords: federalism, tax expenditure, tax penalty, conditional grants, state taxes, local taxes, EITC, TANF

JEL Classification: E62, H24, H77, H71, K34

Suggested Citation

Mason, Ruth, Federalism and the Taxing Power (December 1, 2010). California Law Review, Vol. 99, p. 975, 2011, Available at SSRN: https://ssrn.com/abstract=1645542

Ruth Mason (Contact Author)

University of Virginia School of Law ( email )

United States

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