About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

LOG IN
LOG IN


3 Governance: An Int'l J. Pol'y, Admin, & Institutions 1 (1990)

handle is hein.journals/gvnanlj3 and id is 1 raw text is: Public Choice and the Politics of Comprehensive Tax Reform GARY MUCCIARONI The Tax Reform Act of 1986 represents a watershed in the history of the federal income tax. Far beyond the expectations of most experts and political pundits, the act ushered in the most sweeping tax changes in decades. The most critical aspect of the legislation was its elimination and curtailment of numerous tax expenditure provisions in the law, combined with sharp tax rate reductions. Tax expenditures provide benefits to selected individuals and groups by reducing the amount of taxes they would otherwise owe the government. By the mid-1980s their number and variety had grown to gingerbread proportions. They were devised to provide tax relief to almost every organized and unorganized group in society - from the elderly and unemployed to kiwi fruit growers - and to encourage a wide array of activities, from investing in steel mills to providing health insurance. Under the reform roughly $324 billion in loophole closing over five years was accomplished.1 The top tax rate for individuals fell from 50 percent to 28 percent, and for corporations from 46 percent to 34 percent.2 Tax reform must have seemed as inconceivable to public choice theorists as it did to many politicians and pundits. A central argument of public choice is that vote-hungry politicians favor policies with concentrated benefits and diffuse costs. The incentives that operate in the political marketplace encourage: ... politicians [to} put together a coalition that can obtain appreciable per capita benefits for the identifiable few, while spreading the modest and camouflaged individual costs among the amorphous many (Mitchell 1978, 10). The per capita benefits accruing to members of special interest groups from tax expenditure provisions provide strong incentives for such groups to mobilize to acquire and preserve them. On the other hand, because the costs of such benefits are spread diffusely across a much larger group of people - taxpayers as a whole - there will be less incentive for that group to mobilize to block or eliminate tax expenditures. The per capita benefit imposes only a small cost on the average taxpayer, whereas it may represent a substantial windfall for the interested minority. Governance: An International Journal of Policy and Administration, Vol. 3, No. 1 January 1990 (pp. 1-32), © Research Committee on the Structure and Organization of Government of the International Political Science Association. ISSN 0952-1895