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Tax “Expenditures” and Welfare States: A Critique

  • Monica Prasad (a1)
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1. Surrey Stanley S., “Tax Incentives as a Device for Implementing Government Policy: A Comparison with Direct Government Expenditures,” Harvard Law Review 83 (1970): 705–38; Surrey Stanley S., Pathways to Tax Reform (Cambridge, Mass., 1973); Lubick Donald C., “A View from Washington,” Harvard Law Review 98 (1984): 338–40.

2. Pozen David, “Tax Expenditures as Foreign Aid,” Yale Law Journal 116 (2007): 869–81, 877–78.

3. Howard Christopher, The Hidden Welfare State: Tax Expenditures and Social Policy in the United States (Princeton, 1997).

4. Ibid., 9.

5. Hacker Jacob, The Divided Welfare State: The Battle over Public and Private Social Benefits in the United States (Cambridge, 2002).

6. See Howard, The Hidden Welfare State, 191.

7. Howard Christopher, “Making Taxes the Life of the Party,” in The New Fiscal Sociology, ed. Martin Isaac, Mehrotra Ajay, and Prasad Monica (Cambridge, 2009).

8. Pozen, “Tax Expenditures as Foreign Aid.”

9. Stead Meredith, “Implementing Disaster Relief Through Tax Expenditures,” New York University Law Review 81 (2006): 2158–91.

10. Kelly Erin L., “The Strange History of Employer-Sponsored Child Care: Interested Actors, Uncertainty, and the Transformation of Law in Organizational Fields,” American Journal of Sociology 109 (2003): 606–49; Morgan Kimberly J., “A Child of the Sixties: The Great Society, the New Right, and the Politics of Federal Child Care,” Journal of Policy History 13 (2001): 215–50.

11. Novak William, “The Myth of the ‘Weak’ American State,” American Historical Review 113 (2008): 752–72.

12. Morone James A., “American Ways of Welfare,” Perspectives on Politics 1 (2003): 137–46.

13. Surrey Stanley S., “Tax Incentives as a Device for Implementing Government Policy: A Comparison with Direct Government Expenditures,” Harvard Law Review 83 (1970): 705–38, 717.

14. Reagan Ronald, Reagan’s Path to Victory: The Shaping of Ronald Reagan’s Vision, ed. Skinner Kiron, Anderson Annelise, and Anderson Martin (New York, 2004).

15. Murphy and Nagel’s core argument is that “the modern economy in which we earn our salaries, own our homes, bank accounts, retirement savings, and personal possessions, and in which we can use our resources to consume or invest, would be impossible without the framework provided by government supported by taxes” (emphasis added, Murphy Liam and Nagel Thomas, The Myth of Ownership: Taxes and Justice [New York, 2002])—in other words, that taxes are justified because they provide benefits to the society at large.

16. I am grateful to an anonymous reviewer for these points.

17. Stinchcombe Arthur, “The Functional Theory of Social Insurance,” Politics & Society 14 (1985): 411–30.

18. Esping-Andersen Gøsta, The Three Worlds of Welfare Capitalism (Princeton, 1990); Brady David, Rich Democracies, Poor People (Oxford, 2009).

19. It should be noted that the EITC applies only to those with an income; however, this is an administrative feature of this particular policy, not a feature inherent to refundable tax preferences.

20. Stead, “Implementing Disaster Relief Through Tax Expenditures,” 2165–66.

21. Marshall T. H., Citizenship and Social Class (New York, 1950); Titmuss Richard M., Essays on the Welfare State (London, 1966).

22. Ewald François, L’État-providence (Paris, 1986). An older intellectual lineage is suggested for this thought in Robert Frost’s 1947 “Masque of Mercy,” which hints at early twentieth-century unease over the collectivization of risk: “The thing that did what you consider mischief…. Was the discovery of fire insurance.” See Collected Poems (New York, 1969), 505–6.

23. Hacker Jacob, “Privatizing Risk Without Privatizing the Welfare State,” American Political Science Review 98, no. 2 (2004): 243–60.

24. Baldwin Peter, The Politics of Social Solidarity (Cambridge, 1990).

25. Scholars might also argue that collecting revenues and then distributing them creates state capacity—that is, it creates organizations that acquire expertise in certain kinds of activities, and it creates a set of people with interests that are not reducible to social interests. Those independent interests can have causal effects of their own, and that expertise can be redeployed in other ways. However, the same could be said of the bureaucracies that enforce taxation and tax preferences: reducing taxes in targeted ways requires policing to ensure that citizens are not overstepping the stated limits of the legislation, and these bureaucracies may have similar social effects as welfare bureaucracies.

26. Howard, “Making Taxes the Life of the Party,” 96.

27. Ventry Dennis, “The Collision of Tax and Welfare Politics: The Political History of the Earned Income Tax Credit, 1969–99,” National Tax Journal 53 (2000): 983–1026; Pamela Herd, “The Fourth Way: Big States, Big Business, and the Evolution of the Earned Income Tax Credit,” paper presented at the annual meeting of the American Sociological Association, Boston, 2008.

28. Martin Isaac, The Permanent Tax Revolt (Berkeley and Los Angeles, 2008).

29. Conley Dalton and Gifford Brian, “Home Ownership, Social Insurance, and the Welfare State,” Sociological Forum 21 (1998): 55–82; Conley Dalton, Being Black, Living in the Red: Race, Wealth, and Social Policy in America (Berkeley and Los Angeles, 1999).

30. Of course, no welfare state completely avoids, or wishes to avoid, reinforcing market processes (see, e.g., Korpi Walter and Palme Joakim, “The Paradox of Redistribution and Strategies of Equality,” American Sociological Review 63 [1998]: 661–87). But there are differences in degree that have important consequences for the level of poverty and inequality in a society.

31. Wilensky Harold, Rich Democracies (Berkeley and Los Angeles, 2002); Prasad Monica, The Politics of Free Markets (Chicago, 2006).

32. Milton Friedman to William F. Buckley Jr., 26 April 1974, Box 22, folder 22.13 “Buckley, William F., Jr.,” Milton Friedman Papers, Hoover Institution, Stanford.

33. Baldwin Peter, “Beyond Weak and Strong: Rethinking the State in Comparative Policy History,” Journal of Policy History 17 (2005): 12–33.

34. Pimpare Stephen, “Toward a New Welfare History,” Journal of Policy History 19 (2005): 234–52.

35. Jens Alber, “What the European and American Welfare States Have in Common and Where They Differ: Facts and Fiction in Comparisons of the European Social Model and the United States,” Social Science Research Center Berlin (WZB) (order no. SP I 2009), 203.

36. Adema Willem, Net Social Expenditure, 2nd ed., Labour Market and Social Policy, Occasional Papers No. 52 (Paris, 2001), OECD.

37. Price V. Fishback, “Social Welfare Expenditures in the United States and the Nordic Countries: 1900–2003,” National Bureau of Economic Research, Working Paper 15982,

38. Fishback Price V., “Who Spends More on Welfare: The United States or Sweden?” Freakonomics Blog,

39. Schulz Nick, “The U.S. Is More Compassionate than Sweden?” The Enterprise Blog,; Wilkinson Will, “America’s Nordic-Sized Welfare State,” Will Wilkinson,

40. Monica Prasad, The Politics of Free Markets; see also Monica Prasad, The Land of Too Much, forthcoming.

For comments on earlier versions of this essay I am grateful to Chris Howard, Len Seabrooke, and audience members at the American Political Science Association annual meeting, 2009; and especially to Isaac Martin and Ajay Mehrotra.

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Journal of Policy History
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  • EISSN: 1528-4190
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