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59 Stan. L. Rev. 23 (2006-2007)
Efficiency and Tax Incentives: The Case for Refundable Tax Credits

handle is hein.journals/stflr59 and id is 35 raw text is: ARTICLES EFFICIENCY AND TAX INCENTIVES: THE CASE FOR REFUNDABLE TAX CREDITS Lily L. Batchelder,* Fred T. Goldberg, Jr.,** and Peter R. Orszag*** INTRODUCTION ............................................................................................... 24 I. OVERVIEW OF REFUNDABLE TAX CREDITS ............................................... 32 A. Current Refundable Credits................................................................ 33 B. Has Bipartisan Support for Refundable Credits Crested?.................. 38 II. THE EFFICIENCY CASE FOR REFUNDABLE TAX CREDITS .......................... 42 A. Uniform Refundable Credits as the Efficient Default Structure for Tax Incentives..................................................................................... 43 1. Efficient taxation in the presence of externalities .........................44 2. Putting theory into practice .......................................................... 49 3. Uniformity and refundable credits................................................. 52 B. Income Smoothing at the Household Level........................................ 57 C. Smoothing Macroeconomic Demand ...................................................61 * Assistant Professor of Law & Public Policy, New York University School of Law. ** Partner, Skadden, Arps, Slate, Meagher & Flom LLP; former Commissioner of the Internal Revenue Service and Assistant Secretary of the Treasury for Tax Policy during the George H.W. Bush Administration. *** Joseph A. Pechman Senior Fellow, The Brookings Institution; Co-Director, Urban-Brookings Tax Policy Center; Director, The Hamilton Project; former Special Assistant to the President for Economic Policy and Senior Economist on the Council of Economic Advisers during the Clinton Administration. The authors thank Emil Apostolov, Jennifer Derstine, Gretchen Feltes, Matthew Hall, David Kamin, Mario Mendolaro, and Vinay Patel for outstanding research assistance, and Anne Alstott, Alan Auerbach, Leonard Burman, Stephen Cohen, Noel Cunningham, Peter Diamond, William Gale, Michael Graetz, Robert Greenstein, Jonathan Gruber, Daniel Halperin, Mitchell Kane, Louis Kaplow, Michael Knoll, Ruth Mason, Pamela Olson, Miranda Perry, Alex Raskolnikov, Emmanuel Saez, Deborah Schenk, Daniel Shaviro, Reed Shuldiner, Eugene Steuerle, Dennis Ventry, and participants in the NYU School of Law Faculty Workshop, NYU Wagner Research Colloquium, Penn Law School Tax Policy Workshop, Urban Institute roundtable Giving Credit Where Credit Is Due, and Tel Aviv University Tax Policy Workshop for extremely helpful suggestions. The views expressed in this Article are solely those of the authors, and all errors are ours. 23