The Integration of Tax and Spending Programs

74 Pages Posted: 9 Sep 2003 Last revised: 4 Jan 2012

David A. Weisbach

University of Chicago - Law School; Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP)

Jacob Nussim

Bar-Ilan University - Faculty of Law

Date Written: September 1, 2003

Abstract

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.

Keywords: tax policy, tax base theory, tax expenditures theory

Suggested Citation

Weisbach, David A. and Nussim, Jacob, The Integration of Tax and Spending Programs (September 1, 2003). Yale Law Journal, Vol. 113, p. 955, 2004; U Chicago Law & Economics, Olin Working Paper No. 194. Available at SSRN: https://ssrn.com/abstract=442063 or http://dx.doi.org/10.2139/ssrn.442063

David Weisbach (Contact Author)

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States
773-702-3342 (Phone)
773-702-0730 (Fax)

Center for Robust Decisionmaking on Climate & Energy Policy (RDCEP) ( email )

5735 S. Ellis Street
Chicago, IL 60637
United States

Jacob Nussim

Bar-Ilan University - Faculty of Law ( email )

Faculty of Law
Ramat Gan, 52900
Israel
972-3-531-7088 (Phone)
972-3-535-1856 (Fax)

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