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This paper builds on the literature examining the circumstances surrounding municipal fiscal distress by constructing a broader picture of the factors related to distress and why some cities file for bankruptcy or seek state intervention while others do not. Drawing on previous work, we identified a set of eight possible factors that may serve as predictors of municipal insolvency in the United States. In this article, we examine how prevalent these factors are across 42 fiscally distressed cities and identify significant associations between these factors. We then analyze how these eight factors vary between fiscally distressed cities that have filed for bankruptcy and those cities that are distressed but have not filed for bankruptcy. We found that high percentages of public union density and unfunded pension liabilities were most prevalent risk factors among cities and that significant associations exist between unfunded pension liabilities and three other factors: fiscal home rule authority, intergovernmental aid, and tax and expenditure limits. We also found that both low levels of state aid and evidence of financial mismanagement were more common among distressed cities that filed for bankruptcy than those that did not. Lastly, we identify areas where future research is needed. [ABSTRACT FROM AUTHOR]

In the United States, tax favoritism—an approach that has weakened the extractive capacity of the federal government by providing tax loopholes and preferences for taxpayers—has remained since the 1930s. It has consumed the amount of tax revenue the government can spend and therefore weakened the possibility of the redistribution of fiscal resources. It has also made the federal tax system complicated and inequitable, resulting in undermining taxpayer consent. Therefore, since the 1930s, a tax reform to create a simple, fair, and equitable federal income tax system with the capacity to raise revenue has been long overdue. Many scholars have evaluated the Tax Reform Act of 1969 (TRA69), which Richard M. Nixon signed into law on December 30, 1969, as one of the most successful steps toward accomplishing this goal. This article demonstrates that TRA69 left tax favoritism in the United States. Furthermore, it points out that TRA69 turned taxpayers against the idea of federal taxation, a shift in public perception that greatly impacted tax reform in the years to follow. [ABSTRACT FROM AUTHOR]

This article offers a critical look at the ever-expanding area of public financing for sports stadium development as a means of economic and cultural development in the United States. Public financing can take many forms, such as tax breaks, municipal bonds, or cash contributions; the term is used expansively to encompass these forms of assistance as well as others that result in some effect on tax revenues and expenditures. This article evaluates the merits of public financing provided to aid in stadium construction in an effort to recruit or retain a sports franchise. It discusses the issue's importance, scope, and merits based on both economic and non-economic factors. Overall, the article articulates a defense of the continued public financing of sports stadiums as a means of community development both economically and culturally, while acknowledging the need of local state governments to do so more responsibly. [ABSTRACT FROM AUTHOR]

The article explains ways for U.S. lawmakers to directly mitigate the housing instability in light of the experiences of tenants during the COVID-19 pandemic. Topics discussed include the failure of legislators to implement policies that aim to address housing instability during the Great Recession, potential of people-based interventions such as cash or rental vouchers to mitigate the instability, and the advantages and disadvantages of the tax expenditure approach to affordable housing.

This paper examines how the means through which social benefits are delivered—either through a direct government program, or through a tax expenditure program—affects how citizens view social welfare programs and their beneficiaries. Attitudes toward social spending in the United States are strongly conditioned by both racial considerations and perceptions of the deservingness of recipients. We argue that the political cues given by spending conducted through the tax code differ from those given by direct spending in a way that both de-racializes spending attitudes and changes the lens through which citizens evaluate the deservingness of beneficiaries. Through a series of survey experiments, we demonstrate that social benefits delivered through the tax code are less likely to activate racialized thinking than similar or identical benefits delivered directly. This is true, at least in part, because recipients of tax expenditures are perceived as more deserving than recipients of otherwise identical direct spending. [ABSTRACT FROM AUTHOR]

The authors investigate state-level economic incentive policies in the United States using the Panel Database on Incentives and Taxes for economic development (PDIT). Although interest in evaluating the efficacy of tax and incentive programs is growing, data limitations are formidable: Tax policies and expenditures are difficult to track and administrators are not equipped to gather the data needed for rigorous evaluation. The PDIT covers 45 industries in 32 U.S. states, including the main cities in the 30 largest metropolitan areas. The PDIT simulates the value of an incentive in terms of value added of a hypothetical firm in a particular industry, state, and year from 1990 to 2015. The authors identify and exploit large, discrete changes in incentive policies (e.g., regime changes). Applying the difference-in-differences method, they investigate potential causal links between regime changes and medium-run economic outcomes, including employment, establishment counts, wages, and poverty rates. [ABSTRACT FROM AUTHOR]

The article comments on the potential increase of access to equity capital for women-owned businesses in the U.S. through tax code. Topics discussed are different types of relevant capital investments, tax treatment of capital structures, concept of tax expenditures and goals of tax policy, tax expenditures that benefit small businesses, tax code provisions that exclude women-owned businesses from access points to equity investments, and the concept of gender-based taxation.

How do U.S. companies respond to incentives intended to encourage domestic manufacturing? I study the Domestic Production Activities Deduction (DPAD), which was enacted in the American Jobs Creation Act (AJCA) of 2004 and was the third largest U.S. corporate tax expenditure as of 2017. Using confidential data from the U.S. Bureau of Economic Analysis, I find greater average domestic investment spending of $95.5–$143.6 million, but only within the sample of domestic‐only firms and not until 2010, when the greatest statutory DPAD benefits were available. Additional evidence suggests that U.S. multinational claimants invest abroad rather than in the United States and that the increased investment by DPAD firms is accompanied by a reduction in the domestic workforce, consistent with a substitution of capital for labor. I also show that the delayed investment response is due to firms engaging in other responses first, such as changing corporate reporting to shift income across time and borders. Quantifying the extent of these effects contributes to the literature that studies this tax deduction and informs policy makers as to the effectiveness of both manufacturing incentives and U.S. corporate income tax rate reductions in stimulating real domestic activity. [ABSTRACT FROM AUTHOR]

This article examines the effects of certain research & development (R&D) tax credits enacted in 1981. The author compares the level of R&D investment before and after the credit, as well as the size of the implicit tax. He includes nontax factors into his research to better answer whether a rise in investment is attributable to the credits. Much of the article focuses on assessing the size of the implicit tax, which must be deducted for a proper estimate of the tax credit's real investment effect.

This article presents information related to foreign tax credit limitations and preferred stock issuances. The authors suggest that the U.S. Tax Reform Act of 1986 inadvertently increased the use of preferred stock as a financing instrument among multinationals. The act changed how much interest could be allocated against foreign source income when determining foreign tax credits. The result is that firms restructured their financing activities to avoid domestic debt. Their response to tax changes was purely accounting-based rather than production.

This paper analyzes the circumstances under which tax considerations favor or disfavor the use of index-linked corporate bonds. Using a model similar to Miller's, investors' choices of assets depend on their tax preferences for interest income versus capital gains and their preferences for the timing of returns. It is concluded that the absence of index- linked bonds in the U.S. cannot be attributed solely to tax reasons. However, following the 1986 Tax Reform Act, the tax code is expected to disfavor the use of index-linked bonds. [ABSTRACT FROM AUTHOR]

The article focuses on the acceleration of corporate income tax payments. The purpose of this research is to the provisions of the tax laws, discuss their effects upon corporate working capital, consider the impact of tax acceleration upon corporate financing rules, and inquire into the contribution of tax payments to the bank loan expansion in March of 1956. The author believes that the result will be the acceleration of corporate income tax payments will cause inroads upon working capital and that this will make offsetting increases in bank loans, security issues, or additions to net working capital from profits, or probably a combination of all three.

Why is the tax bar so white? This question has gone unasked for far too long and in this Article we offer one possible answer. We believe that answer lies in the unexamined implications of the concept of tax expenditures. We therefore connect four things: (1) tax expenditures, (2) the way in which the acceptance of the concept has enshrined the notion that taxation should be synonymous only with raising revenue, (3) the consequent relegation of social values to an outsider status, and (4) the lack of diversity in the tax bar. Our claim is that a field of law that regards a single goal--in this case, raising revenue--as its proper objective, is likely to attract to it a more monolithic group of individuals than a field of law that is concerned with promoting multiple and diverse social values. Over time the useful descriptive concept of tax expenditures has evolved into a prescription that the tax system be purged of objectives other than the raising of revenue. Tax expenditures have come to be viewed as undeserving interlopers into what would otherwise be a pristine revenue-raising machine. That view devalues the role of social policy in the tax system and, as a consequence, has obscured and constrained the nature of the tax law. This normative perspective on the tax system is not only incorrect but may be contributing to the lack of racial and ethnic diversity in the tax bar by constricting the group of individuals who may be attracted to tax. Given that available data shows that law students who are members of racial and ethnic minorities are more likely than others to state that they want to "change or improve society" and engage in "socially responsible work," we suggest a link between the lack of racial and ethnic diversity in the tax bar and the normative legacy of tax expenditures, which casts the normative tax system as unconcerned with anything other than raising revenue. [ABSTRACT FROM AUTHOR]

Although nonqualified deferred compensation plans lack explicit tax preferences afforded to qualified plans, it is well understood that nonqualified deferred compensation results in a joint tax advantage when employers earn a higher after-tax return on deferred sums than employees could achieve on their own. But the joint tax advantage depends critically on how plans are operated; chiefly how plan sponsors use or invest deferred compensation dollars. This is the first Article to systematically investigate nonqualified deferred compensation practices. It shows that joint tax minimization historically has taken a backseat to accounting priorities and participant diversification concerns. In recent years, the largest source of joint tax advantage likely stems from use of corporate owned life insurance (COLI) to informally fund nonqualified deferred compensation liabilities. To be sure, the reduction in corporate tax rates enacted in the Tax Cuts and Jobs Act increases the joint tax benefit of nonqualified deferred compensation. Nonetheless, this Article recommends a measured response focusing first on COLI reform and an extension of the application of the Affordable Care Act's Net Investment Income Tax to nonqualified deferred compensation earnings, before considering fundamental reform of the taxation of nonqualified deferred compensation. This Article also reveals that nonqualified deferred compensation results in an undisclosed advantage to corporate executives, as it provides what are effectively above-market returns on retirement savings, and that, at least in recent years, shareholders, not taxpayers, have provided the bulk of the subsidy for nonqualified deferred compensation. [ABSTRACT FROM AUTHOR]

Tax expenditures have become a widely used tool of government in the United States, with the fiscal impact now rivaling appropriations for discretionary spending. But tax expenditures raise important accountability dilemmas and tradeoffs for the nation. We show that, despite repeated recommendations by oversight agencies to address the significant shortfalls in performance associated with this tool, policymakers and public managers alike remain ambivalent about instituting stronger accountability provisions. Our analysis lends support to a more complicated image of principals emerging in the public management literature, one where principals do not always take action to hold their agents to account. The case of tax expenditures calls for greater attention in public management theory and research to the diverse roles that principals play in program implementation and accountability. [ABSTRACT FROM AUTHOR]

We study the role of tax incentives in promoting a fast-growing and novel type of conservation: voluntary, permanent restrictions on private land use through conservation easements. In the United States, easements represent the largest charitable gift on a per-donation basis, but skeptics wonder if their tax preference merely subsidizes wealthy landowners rather than inducing conservation. We incorporate federal and state income tax codes into a calculator to quantify the after-tax donation price and demonstrate its sensitivity to landowner income and state and federal policies. Using a 1987–2012 panel, we measure the response of state-level easements to the price. Our large elasticity estimates, spanning −2.4 to −6.1, indicate that tax incentives induce conservation and do not merely subsidize it. We find no evidence that generous tax benefits have caused less strategic patterns of land conservation. [ABSTRACT FROM AUTHOR]

This paper analyzes the impact of TELs on different types of state expenditures. This study provides comparison analysis of different types of TELs on state level and aims to evaluate the effect of TEL policy on state expenditure structures. Using panel data analysis, this work finds that states with Tax Expenditure Limitations (TELs) - in addition to financial factors- are associated with higher level of state expenditures for corrections and lower levels of state expenditures for police, parks, natural resources, and highway expenditures. Looking at 50 states from 2006 to 2011, this relationship is both statistically and substantively significant. [ABSTRACT FROM AUTHOR]

This Article describes tax expenditures in relation to received legal ideals. Recent scholarship in social science has raised paradigmatic questions of economic inequality and distribution, which may be reflected in the law. Tax expenditures are one way to effect redistribution. Curiously, certain tax expenditures that have a notably regressive effect amount to a significant fraction of the U.S. government budget, which does not identify them as appropriations. In large part, health care, education, and retirement are financed in the United States by the privatizing mechanism of tax expenditures, although they are the three principal public (or quasi-public) goods in modern states. Evaluating the role of these various provisions in a theoretical and historical context entails consideration of individual productivity, natural competition, and potential crisis or collapse within the political economy. To persist, the fiscal apparatus of the state needs to avoid both exhausting productive resources and fostering a rentier class. Alternative presumptions about national share ownership animate specific tax provisions as well as larger visions of the future. While recent restructuring legislation involves tax expenditures, this Article does not propose any specific policy solution but offers legal and economic details in a descriptive analysis. [ABSTRACT FROM AUTHOR]

The article presents the text of the 2018 Erwin N. Griswold Lecture delivered by Martin J. McMahon Jr. before the American College of Tax Counsel. McMahon discusses some realities that the U.S. must recognize, including a tax system that should adequately fund the government and the need to recognize how path dependency often constrains tax reform. He also talks about the implementation of individual income taxation and the classification of certain personal deductions as tax expenditures.

This paper presents a novel methodology for estimating impacts on domestic supply of oil and natural gas from changes in the tax treatment of oil and gas production. Using this approach along with simple market models for oil and natural gas, it finds that removing the major tax preferences for the oil and gas industry would have modest impacts on global oil production, consumption, or prices. Domestic oil and gas production is estimated to decline by 4%-5% over the long run. Global oil prices would rise by less than 1%. Domestic natural gas prices are estimated to rise by 7%-10%. [ABSTRACT FROM AUTHOR]

We study the effect of tax expenditures on the stabilizing power of the tax system. We propose a micro-simulation strategy that exploits links that we identify between automatic stabilizers, tax expenditures, and effective marginal tax rates. Using U.S. tax return micro data from 2000 to 2010, we estimate that, on average, the mortgage interest deduction and the charitable contributions deduction decreased the ability of the tax system to absorb fluctuations in aggregate consumption by an average of 7.4 percent and 3.9 percent, respectively. [ABSTRACT FROM AUTHOR]

The American social welfare system is highly dependent on tax incentives--tax breaks. Overall, including these, the nation spends as much as many other nations do on social welfare. But is this system efficient? Is it fair? Does it protect those who need protection? The author analyzes the issue. [ABSTRACT FROM AUTHOR]

Objectives. We estimated taxpayers' current and projected share of US health expenditures, including government payments for public employees' health benefits as well as tax subsidies to private health spending. Methods. We tabulated official Centers for Medicare and Medicaid Services figures on direct government spending for health programs and public employees' health benefits for 2013, and projected figures through 2024. We calculated the value of tax subsidies for private spending from official federal budget documents and figures for state and local tax collections. Results. Tax-funded health expenditures totaled $1.877 trillion in 2013 and are projected to increase to $3.642 trillion in 2024. Government's share of overall health spending was 64.3% of national health expenditures in 2013 and will rise to 67.1% in 2024. Government health expenditures in the United States account for a larger share of gross domestic product (11.2% in 2013) than do total health expenditures in any other nation. Conclusions. Contrary to public perceptions and official Centers for Medicare and Medicaid Services estimates, government funds most health care in the United States. Appreciation of government's predominant role in health funding might encourage more appropriate and equitable targeting of health expenditures. [ABSTRACT FROM AUTHOR]

Recent research has argued that the American welfare state is not necessarily smaller than the welfare state in other advanced industrial countries. Rather, it is organized on principles that make it seem smaller: Because it functions through tax expenditures and public-private partnerships, it is less visible than welfare states that operate on the principle of direct spending. This review summarizes the most important messages of this revisionist scholarship, particularly in how this form of welfare provision undermines support for the welfare state, increases the complexity and decreases the efficiency of the system, and hides regressive policies from public scrutiny. I then argue that although this work has taught us much about American politics, several gaps need to be addressed. First, the explanation of the origins of this state of affairs is incomplete and unconvincing. Second, while private welfare is an important part of the American experience, the scholarship on private welfare provision has not yet grappled with the fact that private welfare was also historically found in many other advanced industrial countries, but did not crowd out the public welfare state there as it has in the United States. Finally, although the scholarship has usefully called attention to the invisibility of tax expenditures, we should not consider tax expenditures part of the 'welfare state,' because they only rarely accomplish the functions of redistribution and risk pooling of public welfare programs. Rather, in most cases, tax expenditures should be seen as tax cuts, that is, diminishment of state capacity. These observations suggest that the scholarship would benefit from broader engagement with the comparative literature on political economy and from a more precise and conceptually grounded definition of the 'welfare state.' [ABSTRACT FROM AUTHOR]