Public Choice Theory & Earmarked Taxes

41 Pages Posted: 18 Aug 2013 Last revised: 29 May 2014

See all articles by Susannah Tahk

Susannah Tahk

University of Wisconsin Law School

Date Written: March 17, 2014


The Article draws on public choice theory to argue that the manner in which the federal income tax distributes its costs and its benefits undergirds the massive fiscal crises that the federal government is now experiencing. Then, this Article offers recent historical evidence on 1500 state-level taxes to develop a way out of the current tax lawmaking paralysis at the federal level. At present, the federal income tax spreads its benefits widely among large yet diffuse groups, which makes the income tax easy to undermine and difficult to improve. The Article proposes, however, that restructuring the manner in which the federal income tax allocates its costs and benefits can circumvent its self-destructive shortcomings. For this purpose, state-level tax laws offer useful templates. In particular, states "earmark" tax revenues for specific purposes. That arrangement gives rise to fundamentally different tax lawmaking dynamics than those operating at the federal level. To understand how and why these dynamics succeed, the Article presents evidence on the cost-benefit structure of all state-level earmarked taxes from the 1997-2005 historical period. Analysis of this evidence demonstrates that how state-level earmarked taxes laws assign their costs and benefits relates to how revenue-productive and durable these tax laws are. This conclusion furnishes federal tax policymakers with a promising way of revising the federal income tax code to overcome its current defects. The analysis also opens new lines of research at the neglected intersection of public choice theory and scholarship on legal reform.

Keywords: tax, tax policy, earmarked taxes, public choice theory, empirical legal studies

Suggested Citation

Tahk, Susannah, Public Choice Theory & Earmarked Taxes (March 17, 2014). Tax Law Review, 2015; Univ. of Wisconsin Legal Studies Research Paper No. 1231. Available at SSRN: or

Susannah Tahk (Contact Author)

University of Wisconsin Law School ( email )

975 Bascom Mall
Madison, WI 53706
United States

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