Labelling certain provisions in the tax law as tax expenditures has been criticized for lacking an ‘agreed conceptual model’ for distinguishing between integral tax rules and interpolations reflecting spending rather than tax policy. However, the tax expenditure concept can be reformulated as relying on a distinction between (a) the distributional goals that might underlie the use of a tax base such as income or consumption, and (b) allocative goals such as encouraging particular activities or investments. Tax expenditure estimates could be prepared using both measures, including negative tax expenditures (that is, tax penalties) as well as positive ones.
KeywordsConsumption tax base Consumption taxation Haig–Simons income taxation Income tax base Tax expenditures Tax penalties Taxation of corporate profits Taxation of income
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