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But the previous classification should be enlarged to include certain regulations and unfunded mandates or unfunded liabilities. For example, to force an industry to buy clean technology (non pollutant) is similar to levy a tax on the pollutant production (pigounian tax or green tax) seeking pollution control.

3) The tax expenditure control to induce tax reform

Surrey had the idea that the tax expenditure concept could be a tool to induce tax reform. To support this opinion, Ladd cites the following Surrey’s suggestions from his book of 1973:

  • “Although many tax provisions function like expending programs, they are not subject to the same scrutiny as direct spending programs”

  • “Most tax expenditures are inherently unfair because they typically generate more benefits to higher income than lower income households”

  • “Direct spending programs are almost always preferable to tax expenditures”

  • “Most tax expenditures should be eliminated or replaced with more effective spending programs

Surrey not even thought about the usual recommendation that in any event the use of tax expenditure should be evaluated; just to demonstrate if the cost-benefit analysis indicates a more convenient solution than an alternative program of direct spending. He directly wanted a reform of the tax system of wide base without exemptions, which in case of the Income Tax would bring the tax design to a Haig-Simon concept of comprehensive income.

However, Surrey’s aspiration was not only uncompleted, but rather misleading. Evidence indicates that since the first Tax Expenditure Records (1974) on, the list of tax expenditure grew significantly. On the contrary to Surrey aspirations, budgeting tax expenditures generated an inverse effect. While making public benefits received by some sectors, other sectors previously excluded of that benefits were successful in their claims to be included. Legislators generally have few arguments to refuse new similar claims for advantages agreed previously to others. California is an example. The Department of Finance asked in 1984 to eliminate the list of tax expenditure that had been reported during 10 years, because the legislature had neglected 90% of the recommendations of the Department for annulling many of them, while at the same time many sectors or groups of interest have been successful in getting new tax expenditures. The popularization of the reports on tax expenditures had stimulated the demand for more tax expenditures.

In Canada things went on still farther when certain deductions to worker salaries inside the computation of tax expenditure were accepted as "fiscal credit". According to Richard Bird (1988) it was an error to take these deductions as tax expenditure, because they should be considered as being part of the basic structure of the tax (that is, being part of the benchmark), and therefore, to be maintained as normal deductions and not as tax expenditures.

Ladd considers that the future of the concept is not promissory due to:

a) The academic and technical discussion about the optimal tax structure is not conclusive. Recent tendency has been to abandon the idea of burden income (under the concept of Haig-Simon) and instead to levy taxes on consumption. So the standard

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