Good Reasons to Stop Avoiding Taxes

American Bar Foundation

Good Reasons to Stop Avoiding TaxesThe Hidden Welfare State: Tax Expenditures and Social Policy in the United States byChristopher Howard; Taxing Women by Edward J. McCafferyReview by: Elisabeth S. ClemensLaw & Social Inquiry, Vol. 24, No. 2 (Spring, 1999), pp. 517-531Published by: Wiley on behalf of the American Bar FoundationStable URL: http://www.jstor.org/stable/829106 .

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Good Reasons to Stop Avoiding Taxes

Elisabeth S. Clemens

CHRISTOPHER HOWARD. 1997. The Hidden Welfare State: Tax Expenditures and Social Policy in the United States. Princeton, N.J.: Princeton Univer- sity Press. Pp. xiii + 250. $39.50 hard cover; $17.95 paper.

EDWARD J. MCCAFFERY. 1997. Taxing Women. Chicago: University of Chi- cago Press. Pp. 310. $29.95.

Between college and graduate school, I spent a year typing and filing for a firm that specialized in investment deals-movies, section 8 housing, oil drilling-that would produce a few years of losses or tax write-offs before generating significant income. That year left me with a vivid image of the complex topography of tax, a legal landscape that concentrated flows of resources in some directions at the expense of others. Then I went off to graduate school, spent years studying political institutions and social policy, and, in the absence of reminders that it mattered, forgot all about taxation.

This inattention to taxes was not simply a personal case of amnesia but a more general condition in the social sciences. We know more about social spending than we do about tax policy, and, as important, expertise on taxation tends to be segregated from other debates over politics and policy.' Given that we do not know when life will end but know without doubt that our next paycheck will be diminished by federal and state withholding, by

Elisabeth S. Clemens is associate professor of sociology at the University of Arizona. She is the author of The People's Lobby: Organizational Innovation and the Rise of Interest Group Politics in the United States, 1890-1925 (Chicago: University of Chicago Press, 1997) as well as co-editor of Private Action and the Public Good (New Haven, Conn.: Yale University Press, 1998).

1. At the end of Federal Taxation in America: A Short History, Brownlee (1996) provides a very helpful bibliographical essay assessing both the historical literature on U.S. taxation and the major theoretical approaches.

© 1999 American Bar Foundation. 0897-6546/99/2402-517$01.00 517



518 LAW AND SOCIAL INQUIRY

FICA and other predatory acronyms, taxes are in some sense more certain than death. Nonetheless, few scholars have explored how tax structures other political processes. The exceptions, however, provide good reasons to

stop avoiding taxes.

Taxes, as Claude Levi-Strauss said of "savages," are good to think with. Taxes discourage some behaviors, encourage others, and demarcate the "normal" from the deviant or illicit. Ranging across substantive political topics, recent publications by a legal scholar, Edward J. McCaffery, and a

political scientist, Christopher Howard, demonstrate persuasively how fa- miliar questions and claims are reframed once we remember to think about taxes. This analytic lens reveals surprising-at times demoralizing-aspects of gender inequality, the class politics of redistribution, and the divergent development of national welfare states.

So why have these processes escaped the attention of most political analysts? Taxation has been ignored for precisely the same reason that it turns out to be so fascinating: taxes are obscenely complex. Even among experts, definitions of basic concepts of income and tax expenditures are contested. Yet for students of political conflict and legal interpretation, the

inability of most citizens to assess their "interest" in tax provisions suggests that this is a particularly promising field for tracing processes of the construction of identities and interests, the operation of institutions, and the role of ideologies and intentions. Cloaked in an appearance of technical

rationality, the politics of taxation are deeply structured by imperfect infor-

mation, institutional embeddedness, and ideological commitments.

TWO TALES OF TAXATION

Once one bothers to look, taxes clearly matter a great deal in many ways. In Taxing Women, McCaffery carefully dissects the tax code and ac-

companying legal decisions. Building on the scholarship of feminist legal theorists and historians such as Grace Ganz Blumberg (1972), Carolyn Jones (1988), and Reva Siegel (1994), McCaffery demonstrates the many ways tax law in the United States favors traditional single-earner families and places extraordinary burdens on the second, usually female, wage earner. In the context of a deeply held cultural model of the division of labor in which women are presumed to have primary responsibility for care of the home and children, dismaying consequences flow from seemingly technical decisions such as whether individual earners or families should be the unit for filing taxes.

In this effort to reveal how tax laws create, reinforce, and-at least

potentially-transform patterns of social inequality, McCaffery is part of a

larger scholarly movement gathered under the banner of "critical tax the-



Good Reasons to Stop Avoiding Taxes 519

ory."2 Feminist scholarship has been central to these debates, exploring how gender inequality is reflected in and reproduced through specific regulations such as the 1948 adoption of joint filing (which treats families as a unit) in place of the separate taxation of single earners regardless of marital status (which is the standard practice in many industrialized nations). Welfare, pension, and inheritance laws also embody or enact gendered differences, resulting in a tax and legal system with widespread but far from consistent implications for patterns of gender inequality.3 Tax law may also operate symbolically, distinguishing labor that has public standing or generates claims on systems of social provision (e.g., Social Security) from labor that is marginalized as private and enveloped within the sphere of domestic relations (Staudt 1996).

Much of this literature is written from the vantage point of the scholar or even the social engineer. The implicit argument is that a shift in tax- related incentives will produce changes in individual behavior. Taxing Women, by comparison, locates the reader immediately in the place of the taxpayer-male or female-and walks through complex decisions about marriage, labor-market participation, and child rearing. To highlight how taxes may influence behavior (assuming that taxpayers recognize, accurately understand, and respond to marginal tax rates), McCaffery carefully simpli- fies the complexities of the tax code into "an accountant's tale." For the sake of example, begin with a tax code that exempts the first $10,000 of a couple's income from taxation and then taxes additional income at rates that increase through a number of brackets. If the husband is presumed to be the primary earner, then his first $10,000 dollars of wages are classified as tax free and the remainder of his earnings are understood as taxed at succes- sively higher brackets. McCaffery insistently highlights these cultural assumptions, asserting that "to insist on language that is not offensively gendered ... blinds us to a deep and troubling gendered reality" (p. 111). So what happens when the wife, whose "natural" place is at home, decides to go to work? Her very first dollar is understood as taxed at the highest bracket for the husband's earnings, plus social security taxes. From what remains, the couple subtracts the perceived costs of the wife's work including the lost value of her work in the home and the costs of child care. Given these assumptions, the accountant of the tale can easily conclude that married women actually lose money (or make very little) by working.

From this culturally informed but apparently technical calculation, McCaffery argues that all sorts of behavioral consequences flow. Married women tend to face greatly diminished returns from work. In upper income brackets, they may leave the labor force, producing an increasingly special-

2. For a review of this literature, see Zelenak (1998), along with the many responses to his argument included in the same issue.

3. For a valuable review of these arguments, see Alstott 1996.




ized gendered division of labor, while in lower income brackets it makes

perverse economic sense to remain a single mother as the effects of the tax code are amplified by the loss of earned income tax credits and social support programs. Women in upper-income families may also fail to develop human capital through labor market experience, while women in lower income brackets face daunting obstacles in forming families, and women in the middle increasingly manage the stress of both full-time work and the "second shift" documented by Arlie Hochschild (1989). Although McCaf-

fery's stylized "tales" minimize attention to variation in how individuals re-

spond to tax burdens and incentives (a topic that invites much more

empirical research), for his argument major tendencies do matter. Observing patterns in women's participation in the labor market, employers may conclude that women are less dedicated to their jobs or less reliable workers and

engage in "statistical discrimination" that disadvantages all women regardless of their marital status or the internal politics of a particular household

economy. Women then find themselves relegated to less interesting and remunerative jobs, increasing the disincentives to participate in the paid workforce.

The dynamic, behavioral consequences of taxation are also central to

Christopher Howard's study of The Hidden Welfare State: Tax Expenditures and Social Policy in the United States. Building on four case studies of tax

expenditure programs (employer pensions, home mortgage interest deduc-

tions, the Earned Income Tax Credit, and the Targeted Jobs Tax Credit), Howard justifies the significance of his study with a single, rather astonish-

ing fact: "the most striking finding is how much larger the entire American welfare state looks after including tax expenditures. The hidden welfare state is almost half the size of the visible welfare state, making the United States appear less a welfare state laggard than many cross-national studies claim" (p. 17). With a price tag of $400 billion in 1995, "tax expenditures with social welfare objectives" (p. 3) clearly deserve more attention and not

simply because size matters. Howard demonstrates that tax expenditures di-

verge from the claims about timing, benefit structure, and political conflict that are central to the theoretical literature on comparative welfare state

development. At a time when direct social spending is diminishing under the pres-

sures of welfare reform, one is most struck by the way tax expenditures in-

sinuate themselves into the fabric of life, altering patterns of behavior,

expectations, and interdependence.4 In this regard, Howard's analysis ampli- fies McCaffery's account of how the tax system repeatedly reinforces a particular model of the family premised on the single, male wage earner. Inclusive expenditure programs such as the deduction given to employers

4. Direct spending has similar effects, which are made particularly visible by efforts to dismantle spending programs. See Pierson 1994, 13-26.




for the cost of employee pensions and benefits or the home mortgage interest deduction are enmeshed in a complex web formed by the actions of countless individuals. My decision about how much house I can afford de- pends in part on the tax advantages of moving from renting to owning as well as on the expectation that I will eventually be able to sell the house for a price that reflects the same sort of tax advantages to a future buyer. Given these incentives, more people buy homes and gain a direct interest in the maintenance of this tax expenditure. Challenge these expectations and the entire real estate industry would tremble. Expenditures targeted at narrower or less powerful constituencies, however, lack the political insulation af- forded by this social embeddedness. In conjunction with Taxing Women, therefore, Howard's argument documents how the tax code makes it easier for traditional families to live in houses with picket fences.

The Hidden Welfare State also contributes to a growing appreciation of the asymmetries of political and economic decision making. Just as a large body of experimental work has demonstrated that people tend to place more value on losses than on gains of the identical magnitude, the politics of forgoing taxes turn out to operate quite differently than the politics of im- posing taxes (McCaffery, p. 271). Whereas struggles over direct taxation easily spill into major partisan confrontations, tax expenditures are typically enacted with ease and little debate; in the midst of crafting major "tax reform" legislation, the Ways and Means Committee nevertheless quietly in- serted major tax breaks for key constituents in order to secure the votes of their representatives for the overall bill (Birnbaum and Murray 1987, 139-40). Although liberals bear the label of "tax and spend," conservative and moderate politicians frequently support tax expenditures. In addition, third-party providers who stand to benefit from particular tax legislation are as or more prominent in the politics of tax expenditures than are direct beneficiaries of the legislation. In one extreme case, the National Associa- tion of Targeted Jobs Consultants acted as lobbyists for the Targeted Jobs Tax Credit (Howard, pp. 164-65). Finally, the growth of expenditures is easily decoupled from concerns over budget deficits and criticism of government spending (Howard, pp. 9-10). With frequently obscure origins and considerable insulation from political struggles over budgets and deficits, tax expenditures have a relatively unpredictable political life. They induce new patterns of behavior and grow in unanticipated ways, embedding once mi- nor political decisions in the fabric of social and economic life.

Both Taxing Women and The Hidden Welfare State offer compelling historical accounts of the political construction of the tax system in the United States. Analyses of the origins of provisions suggest that the important consequences of taxation may be either intended or unintended; comparisons of the behavioral consequences of tax laws demonstrate how pervasively tax can structure domains of social life. Although presented with admirable




clarity, these accounts are necessarily complex, describing social and economic outcomes that reflect the interaction of the marginal effects gener- ated by multiple programs. Such complexity makes clear why so many social scientists have ignored taxes despite their enormous significance. As Sven Steinmo's (1993) comparative study of taxation suggests, this has been a

particularly powerful temptation for students of U.S. politics. With respect to simplicity and clarity, taxation in the United States is one of the worst of all possible worlds. But, for the same reasons, taxation in the United States illuminates what is at stake in basic questions of political analysis. How do

political actors understand their interests? How do institutions shape political trajectories? How important are ideology and intentionality for ex-

plaining outcomes in American politics?

INTERESTS AND IDENTITIES

Tax systems, like modes of economic production, have the potential to

generate class identities and patterns of conflict. They generate patterns of

behavior, which may give rise to a recognition of group identity and, perhaps, to mobilization for collective action.5 Exploring the roots of a movement of tax resistance during the Depression, David Beito (1989) has documented the central role of public employees-notably the Chicago Teachers' Federation-in pushing for the expansion and reform of property tax assessments and, indirectly, providing a catalyst for a tax revolt. The threat posed by such potential resistance increased with the transformation of the income tax into a mass tax during World War II. This change was

accompanied by an elaborate propaganda effort to persuade citizens that it was their duty, and in their interest, to accede to the new taxation regime (Jones 1996). The expansion of government spending on infrastructure, so-

cial programs, and defense seemed to compensate for the growth of the federal income tax. Yet the twinned expansion of taxation and government benefits or services contained the seeds of its own demise. Paying for

schools, social insurance, and the public components of the good life di-

rectly limited citizens' resources for private purchases. Taxpayers came to think of themselves as consumers of government services at the same time that rising tax burdens threatened other consumption patterns, notably in

the tension between home ownership and property taxation (Lo 1990). The

mortgage interest deduction in the federal income tax code encouraged home ownership, but home ownership left taxpayers vulnerable to local and state politics of property taxation. As local governments sought new reve-

nues, reassessments became more frequent and thorough. As public ameni- ties such as parks and schools raised property values, established

5. This formulation draws on Ira Katznelson's (1986) four-level model of class formation.




homeowners saw their tax bills grow. Through this combination of periodic but geographically specific assessments and rising values, owners of the same sort of home in a community were required to pay taxes that were both higher than before and different than those levied in seemingly comparable communities. Out of their grievances an identity of oppressed taxpayer was formulated; that identity then bridged the discontents of homeowners despite differences in wealth and fueled the mobilization for Califoria's Prop- osition 13, which helped to end "the era of easy finance."

Our understanding of how tax systems both induce and suppress political identities and political mobilization is powerfully complicated by both Taxing Women and The Hidden Welfare State. McCaffery's attention to the impact of progressive marginal rates of income taxation and to their interaction with other fiscal ties between women and the state (e.g., food stamps, Medicaid, the Earned Income Tax Credit) generates a disheartening tale of political fragmentation. Women have not developed an expansive political identity in relation to the tax system precisely because that system generates distinctive dilemmas and interests for women at different income levels (McCaffery, pp. 159-60). Tax expenditures also operate asymmetrically across income groups. Because levels of taxation and levels of tax-privileged consumption (e.g., generous benefits and large mortgages) vary directly with income, the tax system structures group identities and interests more powerfully among privileged social groups. With a large majority of benefits through the mortgage interest and the employer pension deductions accru- ing to those with higher incomes, "means testing" in the hidden welfare state refers to an abundance and not shortage of means (Howard, pp. 32-34).

Howard's analysis of tax expenditures also highlights the generative powers of the tax system with respect to identities and interests. Widely used expenditures such as the home mortgage interest deduction and the employer pension deduction become embedded in imageries of entitlement and "the good life." Identities may also be deconstructed through the tax code. The ongoing shift from collective to individual responsibility for financing health care and retirement is facilitated by proliferating tax-advantaged savings plans such as individual retirement accounts (IRAs) and medical savings accounts (MSAs). A different dynamic operates with respect to tax expenditures that are more narrowly targeted to particular taxpayers or taxable activities. Here, third parties develop expertise in administering programs or helping groups to secure benefits under complex legislation such as the jobs tax credit (Howard, pp. 90, 97). Such highly specialized mobilization renders issues relatively invisible to other potential interest groups, undermining the transparency and accountability of the budgetary process.




INSTITUTIONS

If attention to taxes extends an analysis of class or interest formation from relations of production to fiscal arrangements, research on tax con- firms the wisdom of a heightened attention to institutions across the social sciences.6 At the most basic level, tax appears to provide textbook examples of how context shapes individual action, such as the decisions to buy a

home, to hire additional employees, or, within a couple, to live on one or two salaries. The actual consequences, of course, depend on the degree to which taxpayers are informed, rational, and calculating; their choices

among options (to work more or less in response to a tax cut); and the trade-offs among multiple desired outcomes (e.g., for women who desire both careers and support in their roles as caregivers) (Alstott 1996, 2006-31). These caveats aside, a more refined understanding of tax as a context for individual economic behavior is a major contribution to under-

standing the consequences of particular institutional arrangements. But taxation contributes much more to institutional analysis than more

good reasons to avoid unreconstructed methodological individualism. In

Taxing Women, McCaffery persuasively establishes taxation as a mechanism that links (or provides opportunities to link) cultural scripts about gender roles to patterns of behavior and economic outcomes. In estate tax law, for

example, couples can decrease their total estate tax payments by transferring to a "family trust" the maximum protected from the estate tax, and then

giving the surviving spouse the remainder of the estate. Upon the death of the surviving spouse, a second sum equal to the maximum protected from the estate tax can be given to the children without tax liability. But whereas this double use of the exemption formerly required that the surviving spouse control either the use or ultimate disposition of the part of the estate not transferred to the "family trust," the introduction of the Qualified Termina- ble Interest Property (QTIP) provisions in 1981 allowed the exclusion of the surviving spouse from active control of any of the estate. For affluent

couples, the combination of this element of estate tax law with "the chau- vinistic culture of estate planning" (Dodge 1998, 1735) and the probability that the surviving spouse will be female creates an apparently sexist provision in practice if not necessarily in law.7 Similarly, Howard's discussions of the mortgage interest and employer pension deduction illustrate how the tax code provides incentives to realize a model of residence centered on

private ownership and a model of insurance centered on individual employment. To the extent that spouses have access to these tax-advantaged bene-

fits, the returns to a spouse's work as a secondary earner are diminished.

6. For reviews, see March and Olsen 1989; Powell and DiMaggio 1991; and Steinmo, Thelen, and Longstreth 1992.

7. For differing positions on the patriarchal character of this provision, see Gerzog 1998 and Dodge 1998.




Both studies also attend to a second dimension of institutionalization, the quality of taken-for-grantedness not only in individual action but also in political decision making. McCaffery's forays into tax history and into the history of tax scholarship repeatedly discover "significant silences" on the topic of gender and tax. In case studies of significant decisions and legislation (pp. 29-85, passim), he argues, Supreme Court Justices make dismis- sive arguments, important cases are rarely incorporated into the canon taught in law schools, and important policy discussions of law and the family touch only briefly on the status of working mothers as an important dimension of the relation between families and the tax system.

Whereas McCaffery attributes this taken-for-grantedness to the resonance of tax provisions with deeply held cultural beliefs about gender, Howard attends more extensively to how the organization of political decision making obscures or insulates policymaking through tax expenditures. Unlike spending programs related to social welfare, tax expenditures appear to have a much thinner political and legislative record. Provisions that are now massive, notably home mortgage interest and employer pension deductions, were initially adopted with little discussion and little overt mobilization by interested groups. Also, unlike direct spending programs (which are vulnerable to annual review through the appropriations process), tax expenditures, once written into the code, endure unless specifically targeted for reform or elimination. A loss of this invisibility should result in heightened politicization, a process evident from Howard's overview of the politics of tax expenditures since a 1974 congressional requirement for annual budget estimates of forgone tax revenues as well as direct government expenditures (pp. 105, 115). Taken together, these studies illuminate the complex ways that potentially contentious issues are taken for granted, embedded in cultural beliefs, or insulated from political debate.

Finally, tax provides a concrete example of one of the more prominent metaphors in institutional analysis: lock-in. By this, institutionalists typically signal some process by which patterns of action stabilize through the interdependence or mutual expectations of actors. The tax code's bias against second earners within a family creates incentives for men to specialize in paid employment and women to specialize in child care, a family arrangement that persists despite the fact that many men voice a desire to be more involved in child rearing and women a desire to have access to high-quality, part-time employment. As discussed earlier, these patterns may then lead employers to generalize about differences in men's and women's commitment to work. To the extent that individual hiring and promotion decisions are made on the basis of these generalizations, employers are engaging in statistical discrimination.

Tax expenditures illustrate another important mechanism that locks in particular institutional arrangements: the competency trap. The process of




choosing among political strategies or technologies is complicated by the fact that people tend to become more competent or efficient in using the

strategies that are used most frequently (March and Olsen 1989, 63). The real estate lobby, for example, was slow to expand its political agenda be-

yond the home interest deduction. In addition to their contacts with legisla- tors and the employment of former government officials, the trade associations "had acquired considerable expertise in the technical details of loan programs and educated their members about the need to press con-

stantly for cheaper credit .... They simply had too much political capital invested in a certain kind of housing program to change quickly" (Howard, p. 104). Although an omniscient observer might readily find "interests" for the industry in other sorts of government spending on housing construction, competence in recognizing and exploiting the interest embodied in the tax status of mortgage interest shaped the political strategies of the lobby.

INTENTIONS AND IDEOLOGIES

Taxes clearly matter, but do their consequences reflect the specific intentions of political actors? On this score, McCaffery and Howard come to

substantially different answers. In The Hidden Welfare State, Howard emphasizes the unintended and unforeseen consequences of government action

through tax expenditures. Particularly for deductions established shortly after the introduction of the income tax in 1916, there were few debates and no premonition of the far-reaching consequences of these deductions in

conjunction with the transformation of the income tax from an elite to a mass tax during World War Two. In many of his discussions, tax expenditures appear as a sort of fiscal Frankenstein, not only out of control but also

controlling their makers.

Home ownership had become the norm and a basic part of the Ameri- can dream .... Groups representing third-party providers had organized, grown powerful, and grasped the significance of the home mortgage interest deduction for their members. Anyone who suggested cutting or eliminating the home mortgage interest deduction risked be-

ing labeled an enemy of the nation's housing industry and a threat to home values everywhere. Policy makers were, in short, "locked in" by past decisions that substantially increased the political costs of oppos- ing the home mortgage interest deduction. (Howard, p. 94)

The near immunity of such tax expenditures is strengthened by the resonance of specific policies with deeply held cultural templates, whether




of "women's place" or "the American dream."8 But whereas Howard is ag- nostic on the causal direction of this relationship, McCaffery emphasizes the causal priority of profoundly gendered understandings of family and work. He identifies multiple moments in the history of tax law where the "fit" between tax and beliefs about gender were strained either by variation in state married property laws or by increases in the actual level of married women's employment. At such moments, when it might have seemed possible that the values of tax lawyers (in equity, etc.) would produce changes in the gendered character of tax law, those principles were ignored or twisted in order to reinforce a traditional model of the single breadwinner family: "Our actual policy is consciously and precisely backward to ideal economic

theory. Society is deliberately exacerbating free market failures to get a social result it wants, at a high cost in terms of happiness and social wealth. This is what is known-or what should be known-as 'social engineering"' (p. 245).

Cloaked in an apparent concern for equity, current arguments over

"marriage penalties" are not fueled by a technocratic desire for symmetry in the code but by a cultural commitment to a highly traditional model of the family at the cost of both women's choices and equitable (not even progressive!) taxation across income levels. McCaffrey argues that at the base of the problem of the "marriage penalty" lies the decision to tax families (or married couples) and single earners, rather than to treat all as single earners. In McCaffery's stylized examples (pp. 17-19), two individuals each make $30,000, each faces a $10,000 zero-bracket and a 15% tax rate on income over $10,000, and each pays $3,000 in taxes. Should these two marry, however, their combined income would place them in a higher tax bracket (even with the somewhat higher zero-bracket). Marriage increases their combined tax burden although they are making exactly the same combined income. Marriage between one person with a high income and one who makes little or no income produces a "marriage bonus." The greater zero- bracket for the newlyweds will decrease their total taxable income. Given the progressivity of the income tax, efforts to decrease the marriage penalty disproportionately benefit the highest-earning couples (p. 79). The lack of attention to "marriage bonuses" in the current debate obscures the benefits that the tax code provides to traditional single-earner families or families where the two spouses make very different incomes, with the male typically bringing in the larger sum.

In the debate over whether tax shapes culture or culture shapes tax, there need be no definitive answer (nor, perhaps, should we expect one since the most plausible argument is for a reciprocal relationship). For both

8. The relationship of specific policy proposals to more general cultural beliefs or values is also central to recent analyses of direct spending and regulation. See Clemens and Cook, forthcoming; Skrentny 1996; and Weir 1992.




positions, however, the evidence offered is an absence of discourse: for Mc-

Caffery, an absence of discussion of alternative models of marriage and women's work, for Howard, an absence of debates over the introduction of new expenditures such as the home mortgage interest deduction. To deter- mine whether these absences in the official records of legislative debates and judicial decisions are "simply silences" or "significant silences," the

scope of inquiry needs to be expanded "backstage" to the informal records of

conversations, letters, and multiple drafts, as well as "offstage" to the arguments of parties marginalized by formal political institutions.9 If we find

nothing, then it may be appropriate to agree with Howard that tax some- times just happens and the interesting effects lie in how these happenings reshape identities and interests. But we may also find evidence that supports McCaffery's claims that deeply held cultural beliefs powerfully shape the

adoption and implementation of tax law.

THE POLITICS OF TAXATION

These divergent assumptions about the intentional determination of the tax system lead to quite different views of the actual and desired politics of taxation. The Hidden Welfare State emphasizes the unintended and the unobserved. Expenditures that will become massively important are introduced with little debate and, perhaps unavoidably, foreknowledge of related

changes in taxation. Important innovations are introduced by unelected bu-

reaucrats or pushed covertly by powerful congressmen, unremarked in either

case by public discussion or the mobilization of interest groups. Tax expenditures provide a surprisingly strong case for the relative autonomy of the

state; decisions with far-reaching consequences have indeed been made in

smoke-filled rooms and in technical analyses.10 This insulation may be nec-

essary to avoid policy paralysis; following the 1974 requirement for estimates of tax expenditures, tax policy has become far more politicized (Howard, pp. 115, 129, 135, 158-59), and the distinction between direct spending and

tax expenditures has blurred. To the extent that insulation is a problem in

tax politics, institutional rules that promote openness and visibility are the

solution. In Taxing Women, McCaffery suggests that changes in the income tax

will depend more heavily on a process of ideological critique. This entails,

first, a reorientation of discussions of taxation from a concern with distribu-

tional equity (e.g., taxing families with equal earnings equally) to the dynamic behavioral consequences of tax law. Taxes are not simply a tithe on

9. For a survey of research designs in institutional analysis that make use of discursive

evidence, see Schneiberg and Clemens, forthcoming. 10. For a page-turning analysis of this style of tax politics, see Birnbaum and Murray

1987.




existing patterns of economic activity; they shape incentives that are likely to influence those activities in powerful ways, clearly earning the label of "social engineering" provided by McCaffery. This intellectual orientation provides a normative basis for thinking about how to impose taxes: minimize the extent to which taxes alter behavior.

Whereas many analyses of tax law focus on tax as a system of incentives that can change behavior, McCaffery concludes with a thought exper- iment that reverses figure and ground. The theory of the optimal tax directs attention to identifying those behaviors that are relatively insensitive to taxation, or inelastic. If everyone feels they must have an apple a day, but thinks of oranges as a luxury, tax apples not oranges. Similarly if men tend to be highly committed to paid employment while women are more likely to be torn between the options of work and child care, the implication of optimal tax theory would be that men should be taxed more heavily than women (or, more appropriately, than second earners).11 Unlike the pro- posed "flat tax," which would tax all income equally regardless of how will- ing people were to earn it, an "optimum tax" disproportionately burdens the taxable activities that are least sensitive to marginal tax rates. In practice, of course, identifying these activities-as well as variations across individuals in their sensitivity to tax rates-would be an enormous challenge.

Finally, McCaffery urges reader to question the taken-for-granted, the deeply embedded cultural scripts that interact with the formal provisions of the tax code. Work does not have to be organized in a particular way; families can be imagined in many ways. If the robustness of the tax code flows from the resonance of seemingly technical rules with deep cultural beliefs, change begins by rethinking those templates of gender, family, and equity.

Both books are, in their own ways, revelations. For students of social policy and political institutions, The Hidden Welfare State recalls a lesson from the sea: with states, as with icebergs, much of the action is under the water. By tracing the shadow history of public expenditures, Howard effec- tively undermines the generality of arguments about the timing and politics of welfare state expansion.

If Howard speaks primarily to the scholar, McCaffery's Taxing Women addresses the citizen as well. Read this book and you will be angry, you will tell others to read it, you may even be inspired to learn more about tax law. Through this forceful analysis of the cultural, economic, and behavioral consequences of income tax law, McCaffery reminds us that taxes are not only good to think with. It is vital that we think about them often, seriously, and critically.

11. For a critical discussion of research on the elasticity of married women's labor supply and the use of this research by legal scholars, see Alstott 1996, 2018-22.




REFERENCES

Alstott, Anne L. 1996. Tax Policy and Feminism: Competing Goals and Institutional Choices. Columbia Law Review 96:2001-82.

Beito, David T. 1989. Taxpayers in Revolt: Tax Resistance during the Great Depression. Chapel Hill: University of North Carolina Press.

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Good Reasons to Stop Avoiding Taxes