Law Commons^™

Can Tax Expenditure Analysis Be Divorced From A Normative Tax Base?: A Critique Of The 'New Paradigm' And Its Denouement, J. Clifton Fleming Jr., Robert J. Peroni

Faculty Scholarship

Tax expenditure analysis (TEA) requires a baseline for identifying tax provisions that provide subsidies or incentives instead of serving to define the tax base and to implement the tax. With respect to the federal income tax, the baseline historically has been the Schanz-Haig-Simons (SHS) definition of income with a few modifications. Critics have continuously and strongly attacked TEA by characterizing the SHS baseline as unprincipled, imprecise, and insufficiently related to our hybrid income/consumption tax system as it actually exists. Since the baseline is hopelessly defective, so the critics argue, TEA is fatally dysfunctional and the results of its application to …