Law Commons^™

The Failed Federalism Of Affordable Housing: Why States Don't Use Housing Vouchers, Noah Kazis

Articles

This Article uncovers a critical disjuncture in our system of providing affordable rental housing. At the federal level, the oldest, fiercest debate in low-income housing policy is between project-based and tenant-based subsidies: should the government help build new affordable housing projects or help renters afford homes on the private market? But at the state and local levels, it is as if this debate never took place. The federal government (following most experts) employs both strategies, embracing tenant-based assistance as more cost-effective and offering tenants greater choice and mobility. But this Article shows that state and local housing voucher programs are …

State Digital Services Taxes: A Good And Permissible Idea (Despite What You Might Have Heard), Young Ran (Christine) Kim, Darien Shanske

Articles

Tax systems have been struggling to adapt to the digitalization of the economy. At the center of the struggles is taxing digital platforms, such as Google or Facebook. These immensely profitable firms have a business model that gives away “free” services, such as searching the web. The service is not really free; it is paid for by having the users watch ads and tender data. Traditional tax systems are not designed to tax such barter transactions, leaving a gap in taxation.

One response, pioneered in Europe, has been the creation of a wholly new tax to target digital platforms: the …

The Failed Federalism Of Affordable Housing: Why States Don't Use Housing Vouchers, Noah M. Kazis

Michigan Law Review

This Article uncovers a critical disjuncture in our system of providing affordable rental housing. At the federal level, the oldest, fiercest debate in low-income housing policy is between project-based and tenant-based subsidies: should the government help build new affordable housing projects or help renters afford homes on the private market? But at the state and local levels, it is as if this debate never took place.

The federal government (following most experts) employs both strategies, embracing tenant-based assistance as more cost-effective and offering tenants greater choice and mobility. But this Article shows that state and local housing voucher programs are …

On Yang's Proposed Federal Tax On Subnational Tax Incentives, David Gamage, Darien Shanske

Articles by Maurer Faculty

This essay analyzes presidential candidate Andrew Yang’s proposal to tax subnational tax incentives for companies at a rate of 100 percent.

Tax Cannibalization And Fiscal Federalism In The United States, David Gamage, Darien Shanske

Articles by Maurer Faculty

We began this project pondering a riddle. Most state governments have adopted what we-and many others-view as clearly suboptimal tax policies, especially in regard to the taxation of corporate income and capital gains. Yet, with the notable exception of those who oppose progressivity and the taxation of capital, state-level tax policymakers have had remarkably little appetite for reform.

This Article provides one major explanation for this riddle by identifying and demonstrating a phenomenon that we label as "tax cannibalization." We argue that flawed state-level tax policies derive in part from perverse incentives inadvertently created by the federal government.

The Federal Government's Power To Restrict State Taxation, David Gamage, Darien Shanske

Articles by Maurer Faculty

This essay evaluates the limits on the U.S. federal government’s powers to restrict the taxing powers of state governments. The essay revisits earlier debates on this question, to consider the implications of the Supreme Court’s decision in National Federation of Independent Business v. Sebelius and also academic research on the problem of tax cannibalization.

Tax Cannibalization And State Government Tax Incentive Programs, David Gamage, Darien Shanske

Articles by Maurer Faculty

States and localities offer businesses an enormous amount of tax incentives to locate within their jurisdictions despite: 1) the mass of evidence that suggests that these incentives are not particularly effective and, 2) substantial doubts about their constitutionality.

In this essay, we develop a new critical perspective on state tax incentives. We argue that offering these incentives permits states to offer lower taxes to more mobile businesses while keeping their overall corporate tax rates high. This is arguably not the best choice for the states, but it is definitely not the best choice for the federal government. Because the states …

Charitable Giving, Tax Expenditures, And Direct Spending In The United States And The European Union, Lilian Faulhaber

Faculty Scholarship

This Article compares the ways in which the United States and the European Union limit the ability of state-level entities to subsidize their own residents, whether through direct subsidies or through tax expenditures. It uses four recent charitable giving cases decided by the European Court of Justice (ECJ) to illustrate the ECJ’s evolving tax expenditure jurisprudence and argues that, while this jurisprudence may suggest a new and promising model for fiscal federalism, it may also have negative social policy implications. It also points out that the court analyzes direct spending and tax expenditures under different rubrics despite their economic equivalence …

Does Federal Spending 'Coerce' States? Evidence From State Budgets, Brian Galle

Georgetown Law Faculty Publications and Other Works

According to a recent plurality of the U.S. Supreme Court, the danger that federal taxes will “crowd out” state revenues justifies aggressive judicial limits on the conditions attached to federal spending. Economic theory offers a number of reasons to believe the opposite: federal revenue increases may also float state boats. To test these competing claims, I examine for the first time the relationship between total federal revenues and state revenues. I find that, contra the NFIB plurality, increases in federal revenue -- controlling, of course, for economic performance and other factors -- are associated with a large and statistically significant …

Charitable Giving, Tax Expenditures, And Direct Spending In The United States And The European Union, Lilian V. Faulhaber

Georgetown Law Faculty Publications and Other Works

This Article compares the ways in which the United States and the European Union limit the ability of state-level entities to subsidize their own residents, whether through direct subsidies or through tax expenditures. It uses four recent charitable giving cases decided by the European Court of Justice (ECJ) to illustrate the ECJ’s evolving tax expenditure jurisprudence and argues that, while this jurisprudence may suggest a new and promising model for fiscal federalism, it may also have negative social policy implications. It also points out that the court analyzes direct spending and tax expenditures under different rubrics despite their economic equivalence …

Fiscal Federalism As Risk-Sharing: The Insurance Role Of Redistributive Taxation, John R. Brooks

Georgetown Law Faculty Publications and Other Works

In addition to funding government and redistributing income, a redistributive tax-and-transfer system, and a progressive income tax in particular, provides insurance against the risk of uncertain future income. By providing for high taxes for high incomes, and low taxes, exemptions, and transfers for low incomes, a progressive income tax lowers the volatility of potential after-tax income relative to a lump-sum tax. This insurance function is distinct from the redistributive function of the system, since it provides a direct risk-mitigation benefit to the taxpayer himself, rather than simply redistributing income from one taxpayer to another.

This article analyzes the question of …

Engaging Deliberative Democracy At The Grassroots: Prioritizing The Effects Of The Fiscal Crisis In New York At The Local Government Level, Patricia E. Salkin, Charles Gottlieb

Patricia E. Salkin

Part I of this Article discusses many of the factors contributing to the fiscal crisis at the local level in New York including historic decreases in federal and state revenue sharing, the imposition of a new property tax cap, the failure of New York to address meaningfully the subject of unfunded mandates on local governments, and the dependency of some local jurisdictions on the timely adoption of a state budget. Part II discusses concepts of deliberative democracy and how local residents might be engaged to become partners with local officials in making difficult fiscal decisions that impact all community residents. …

The Inefficiencies Of Legislative Centralization: Evidence From Chinese Provincial Tax Rate Setting, Wei Cui

Wei Cui

Legislative power in China is centralized to an unusual degree, both in comparison to other countries and relative to the country’s high degree of administrative decentralization. Given its a priori inefficiencies, this arrangement should be significant from both positive and normative perspectives, but, surprisingly, has received little attention in legal and social scientific scholarship. We devise a novel method for analyzing the inefficiencies of centralization through studying provincial government behavior, examining provincial rate setting for the vehicle and vessel tax (VVT) in 2007 and 2011. Because all provinces have assigned VVT revenue and VVT administration to sub-provincial governments, provincial rate-setting …

The Origin Of The High Centralization Of Tax Legislative Power, Wei Cui

Wei Cui

The high degree of centralization of tax legislative power in China has produced frequent controversies in practice, and is also fundamentally inconsistent with certain basic principles of public finance and the rule of law. However, this arrangement is commonly assumed as a given for the contemporary Chinese polity. This article challenges this prevalent view. It argues that the centralization of tax legislative power began only in 1977, and was by no means a fixed institution before that time. Moreover, such centralization strengthened between 1977 and 1993, which was a period regarded as the golden age of fiscal decentralization. Thus there …

Purpose Vs. Power: Parens Patriae And Agency Self-Interest, Daniel L. Hatcher

All Faculty Scholarship

The purpose of human service agencies to serve vulnerable populations such as abused and neglected children derives from the common law doctrine of parens patriae, embodying the inherent role of the state as parent of the country. However, along with this foundational purpose, the parens patriae doctrine also provides power that is illusive to public knowledge and oversight. To maintain their cloak of power, the very agencies created to fulfill the parens patriae obligations — to protect the rights of children — have systematically battled the children’s efforts to claim those rights as their own. Also, the agencies have now …

Engaging Deliberative Democracy At The Grassroots: Prioritizing The Effects Of The Fiscal Crisis In New York At The Local Government Level, Patricia E. Salkin, Charles Gottlieb

Scholarly Works

Part I of this Article discusses many of the factors contributing to the fiscal crisis at the local level in New York including historic decreases in federal and state revenue sharing, the imposition of a new property tax cap, the failure of New York to address meaningfully the subject of unfunded mandates on local governments, and the dependency of some local jurisdictions on the timely adoption of a state budget. Part II discusses concepts of deliberative democracy and how local residents might be engaged to become partners with local officials in making difficult fiscal decisions that impact all community residents. …

Bankruptcy, Backwards: The Problem Of Quasi-Sovereign Debt, Anna Gelpern

Georgetown Law Faculty Publications and Other Works

This Feature considers the debts of quasi-sovereign states in light of proposals to let them file for bankruptcy protection. States that have ceded some but not all sovereign prerogatives to a central government face distinct challenges as debtors. It is unhelpful to analyze these challenges mainly through the bankruptcy lens. State bankruptcy posits an institutional fix for a problem that remains theoretically undefined and empirically contested. I suggest a way of mapping the problem that does not work back from a solution. I highlight the implications of sovereign immunity, immortality, concurrent authority, macroeconomic policy, and democratic accountability for quasi-sovereign debt …

Fiscal Federalism In Chinese Taxation, Wei Cui

Wei Cui

The legal debate about the decentralization of taxing power in China has mainly centered around a directive issued by the State Council at the end of 1993, which directive, at the same time as launching the well-known and widely-discussed tax reform of 1994, announced that legislative power regarding taxation would be reserved exclusively for the central government. This directive has no constitutional basis, and its subsequent statutory incarnations are all either incomplete or ambiguous. Moreover, in the adoption of tax regulations for many types of taxes, there have been numerous deviations from this principle of centralization, and the bearing of …

Poverty Revenue: The Subversion Of Fiscal Federalism, Daniel L. Hatcher

All Faculty Scholarship

Fiscal federalism is a staple of economic theory that underlies the federal-state partnership in the nation‘s largest federal grant-in-aid programs, such as Medicaid and Title IV-E Foster Care. The theory is founded on a simple principle, the collaboration of the federal government‘s financial power and stability and state governments‘ ability to deliver services tailored to regional needs. However, the theory ignores a vast industry that has grown around the flow of federal funds. In addition to providing operational and consulting services for all aspects of government aid, this poverty industry - which usurps inherently governmental functions and is rife with …

Laboratories Of Democracy? Policy Innovation In Decentralized Governments, Brian D. Galle, Joseph K. Leahy

Brian D. Galle

Innovations in government produce positive externalities for other jurisdictions. Theory therefore predicts that local government will tend to produce a lower than optimal amount of innovation, as officials will prefer to free-ride on innovation by others. As Susan Rose-Ackerman observed in 1980, these two predictions, if true, tend to undermine arguments by proponents of federated government that decentralization will lead to many competing “laboratories of democracy.” In this paper, which is aimed primarily at legal academics, we review and critically assess nearly three decades of responses to Rose-Ackerman’s arguments, none of which have been discussed in depth in the legal …

Federal Grants, State Decisions, Brian D. Galle

Brian D. Galle

The authority to raise and spend money is one of the most expansive and fundamental of all Congress' enumerated powers, particularly when Congress chooses to impose conditions on those who wish to receive its cash. The consensus modern view of this “conditional spending” is that its unfettered use threatens the diversity and accountability goals of “our federalism.” As a result, nearly all commentators support either direct or indirect judge-made limits on conditional spending. These claims, I argue, rest on a set of largely unexamined assumptions about the political motivations, budgetary situation, and incentives of the state officials who must decide …

Federal Grants, State Decisions, Brian Galle

Georgetown Law Faculty Publications and Other Works

The authority to raise and spend money is one of the most expansive and fundamental of all Congress' enumerated powers, particularly when Congress chooses to impose conditions on those who wish to receive its cash. The consensus modern view of this conditional spending is that its unfettered use threatens the diversity and accountability goals of our federalism. As a result, nearly all commentators support either direct or indirect judge-made limits on conditional spending. These claims, I argue, rest on a set of largely unexamined assumptions about the political motivations, budgetary situation, and incentives of the state officials who must decide …

Designing Interstate Institutions: The Example Of The Streamlined Sales & Use Tax Agreement, Brian D. Galle

Brian D. Galle

This Article presents a case study in designing cooperative interstate institutions. It takes as its subject the Streamlined Sales and Use Tax Agreement (“SSUTA”), a recently-developed compact among the States now awaiting congressional ratification. The SSUTA’s primary goal is to bring uniformity to the field of state and local sales taxation, a regime in which multi-jurisdictional sellers now confront literally thousands of different sets of rules. I predict here that the SSUTA as currently designed is unlikely to accomplish that goal, and attempt to suggest possible amendments that could improve its expected performance. From these efforts I extract larger lessons …

Introduction To Comparative Fiscal Federalism: Comparing The European Court Of Justice And The Us Supreme Court's Tax Jurisprudence, James R. Hines Jr.

Other Publications

This volume brings together scholars from both sides of the Atlantic to consider federalist tax jurisprudence as practiced in Europe and the United States. These essays display a broad range of shared concerns, which is not to say that the scholars agree on all points of substantive policy and interpretation. What can be said is that there is general agreement that the exercise of comparing the tax jurisprudence of the European Court of Justice and the US Supreme Court is likely to be informative and beneficial to all concerned.

Designing Interstate Institutions: The Example Of The Ssuta, Brian D. Galle

ExpressO

This Article presents a case study in designing cooperative interstate institutions. It takes as its subject the Streamlined Sales and Use Tax Agreement (“SSUTA”), a recently-developed compact among the States now awaiting congressional ratification. The SSUTA’s primary goal is to bring uniformity to the field of state and local sales taxation, a regime in which multi-jurisdictional sellers now confront literally thousands of different sets of rules. I predict here that the SSUTA as currently designed is unlikely to accomplish that goal, and attempt to suggest possible amendments that could improve its expected performance. From these efforts I extract larger lessons …

Public Finance In The American Federal System: Basic Patterns And Current Issues, Richard Briffault

Faculty Scholarship

Public finance issues with significant consequences for American federalism have been at the top of the political agenda for the last several years. Indeed, much of the current debate about American federalism has been explicitly about questions of public finance: Which level of government should pay for which programs? What is to be the relationship between financial responsibility and policy-making authority? Should there be some overall limitation on government outlays and receipts?

Thus, one of the first actions of the 104th Congress was passage of a measure, swiftly signed into law by the President, to curb the ability of the …

A Case Study In Fiscal Federalism: New York City And New York State, Carol O'Cleireacain

Fordham Urban Law Journal

This essay argues that under the current system of American state and local government funding schemes, there is a permanent imbalance between revenues and expenditures as a result of strain placed on local governments by other levels of government which can only be fixed with actions take by these other levels of government. This essay examines the current structure of American "Fiscal Federalism", the recent experience of America's cities with Fiscal Federalism (particularly New York), changing relationship between city and state government, and Governor Mario Cuomo's proposal for a phased-in takeover of Medicaid spending. The author concludes that the Governor's …