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Tax reform discourse.

B. Calling a Truce

As Boris Bittker suggested, (235) the perennial focus on tax expenditures is not, in itself, a problem; rather, the problem lies in the purpose of focusing on them. (236) In tax reform debates, the purpose of focusing on tax expenditures is to eliminate them. This and the next section explain why, instead of aiming to eliminate most or all tax expenditures, we should accept that tax expenditures are an ineluctable part of our tax system. This explanation draws upon the human development approach's combination of theory with pragmatism as well as its eschewal of blinkered vision in favor of taking a holistic view of an issue. Once we accept that tax expenditures have a natural place in our tax system, we can begin to consider how to rehabilitate and reform tax expenditures so that they coordinate well with nontax efforts to advance human development.

1. Tax Exceptionalism

To paraphrase Antony in Shakespeare's Julius Caesar, contributors to tax reform debates generally come to bury tax expenditures, not to praise them. (237) As the discussion in the previous section illustrates, the movement to eliminate tax expenditures is motivated--explicitly or implicitly and to a greater or lesser extent--by the notion that the income tax can be made fairer, more efficient, and more administrable by adopting "a 'neutral, scientific [i.e., economic] definition of ... income.'" (238) Naturally, academic commentators are the ones who tend to rely explicitly upon an economic or "scientific" definition of income as their baseline in critiquing tax expenditures. (239) Lay commentators (whether politicians or members of the general public) do so only implicitly, as they advocate for the elimination of tax "loopholes"--a pejorative term that evokes a gap in, or departure from, the theoretically appropriate tax base. (240) Moreover, the call to eliminate tax expenditures in order to move toward a more neutral, scientific vision of the tax base is often selectively made, targeting some tax preferences but leaving others untouched. (241) In some cases, the reason for this selectivity is unexplained; (242) in others, it is seemingly a matter of self-interest; (243) and, in yet others, it is more principled (e.g., calling for the repeal only of tax expenditures whose costs outweigh their benefits). (244)

The basic problem with this view is that it is founded upon tax "exceptionalism"--the notion that tax law is unique and different from other areas of U.S. law. (245) David Weisbach and Jacob Nussim have pointed out that "the only way one can make the arguments made by CTB advocates is to treat the tax system as separate from the rest of the government." (246) The Joint Committee on Taxation (JET) has embraced this view, asserting that:
  There ... is merit to the argument that tax expenditure analysis
  reflects tax "exceptionalism"--the belief that the tax system
  ordinarily ought not to be burdened with the sort of ad hoc political
  compromises reflected on the face of much spending legislation. In
  the view of the JCT Staff, however, that "exceptionalism" is largely
  justified. (247)


From this perspective, the path to achieving a just tax system lies in setting tax apart from all other areas of law--rendering it neutral and apolitical--and then hewing as closely as possible to a theoretically perfect tax base. (248) Thus, the tax laws should be burdened with the task of achieving nontax ends--if at all--only on the rare occasion when the tax laws can be shown to be the best vehicle for accomplishing the task. (249) Even in its mildest iterations, this view privileges structural (i.e., "tax") over nonstructural (i.e., "nontax") provisions in the tax laws, imposing burdens on nonstructural provisions from which structural provisions are wholly exempt.

2. A More Realistic Starting Point

To my mind, however, it is a serious mistake to start from the premise that tax law is exceptional. Instead, the starting premise should be a more holistic--and realistic--one that recognizes that tax is not set apart from other areas of the law, from the spending side of the fiscal system, or from social systems more generally; rather, it is merely a part of this much larger sociolegal picture. A more holistic starting premise is also more realistic for two primary reasons: (1) the longevity of tax expenditures and (2) the expressive function of the tax laws.

a. Longevity

Tax expenditures have been with us since the earliest days of the modern U.S. federal income tax and have been the target of reformers since at least the time when the income tax moved from being a "class" tax to a "mass" tax. For example, the deduction for personal interest--and, more particularly, home mortgage interest dates back to the inception of the modern federal income tax in 1913. (250)

Furthermore, as described in the previous section, the battle to eliminate tax expenditures has been going on for nearly seventy years and, despite the increasing salience of tax expenditures, there is no end in sight. After all, it has been nearly forty years since Congress mandated the compilation of a tax expenditure budget as part of the annual budgeting process in an effort to make tax expenditures more salient to lawmakers. (251) As mentioned above, in the first thirty years of this heightened salience, the absolute number of tax expenditures was not reduced but actually doubled. (252)

b. Expressive Function

This leads us into a discussion of the expressive function of the tax laws. Interestingly, Boris Bittker dated CTB advocates' alarm about the erosion of the tax base and attacks against tax loopholes to the days following World War II. This coincides with the shift in the role of the income tax from a "class tax" on the wealthy to a "mass tax" that applied to the population more broadly. (253) Prior to World War II, the income tax only applied to the wealthiest Americans and "was justified as a means of combating an 'unjust concentration of wealth and economic power.'" (254) As Carolyn Jones has explained, the message conveyed by the income tax had a "punitive cast," especially "when it was enforced, at least for a time, by publicity of certain information from taxpayers' returns and when the tax affairs of the nation's wealthiest citizens were paraded before Congressional hearings." (255)

(1) "Functional Necessity"

During World War II, the expressive function of the income tax changed as it was converted from a form of punishment against "'economic royalists'" into the people's chosen means for funding the costs of war. (256) As mentioned above, there had been tax "preferences" before World War II; however:
  Millions of new taxpayers joined the system, and they demanded
  millions--well, thousands--of new preferences. Most were reserved for
  the rich and famous, but others had a more plebian quality. The
  mortgage interest deduction was a principal concession--a feature of
  the tax system since 1913, it took on new importance as homeownership
  soared in the postwar era. Similarly, the tax-free treatment of
  health insurance benefits found a broad constituency once unions
  made employer-provided insurance a fixture of the modern labor market.
  (257)


Thus, in the early days of the income tax as a "mass tax," tax preferences were viewed as a "functional necessity" to make income taxation palatable to a population that had previously viewed this tax as a "rich man's burden." (258)

The "functional necessity" of tax preferences has not waned with time. For example, the home mortgage interest deduction has been called "the 'most sacred tax break in the code,' the 'third rail of tax reform,' a member of the 'Holy Trinity of U.S. social programs,' and 'an American birthright' so 'sacrosanct' that the 'mere thought of tampering with it was unpatriotic.'" (259) Similarly, it has been said that the deduction for charitable contributions is "politically unassailable" (260) and "almost a third rail in tax policymaking. ... [though] not quite as untouchable as the mortgage interest deduction . ... (261) Despite their erosion of the theoretically perfect tax base, these tax expenditures have come to be seen as a politically unassailable necessity.

(2) Mirroring Society

Tax preferences have thus been with us since the earliest days of the income tax and took on the important role of a necessary palliative following World War II--a role that is still relevant today. But tax preferences were--and are--more than just a functional necessity, they are a reflection of our society. Comparative law scholars generally view law as a mirror of society. (262) Naturally, there is controversy regarding how closely law mirrors society; however, areas of public law, such as tax law, are thought to be particularly closely tied to the societies of which they are a product. (263) Notwithstanding the general bias toward viewing tax law as technical and apolitical, (264) even comparative tax scholars have come to embrace the notion that tax law is culturally specific:
  The level of sensitivity of tax rules to the local tax culture differs
  based on the nature of the tax rule. One can imagine that the
  'universal' or 'scientific' rules, such as those based on accounting
  or market exchanges, are less sensitive than those 'indigenous' rules
  that reflect political or social values, such as progressivity, or
  tax expenditures for social programs. (265)


The ties between tax law and American society can be seen in a number of areas. For instance, the tax laws contain a number of preferences that privilege homeowners over renters, including the implicit exclusion of imputed rental income from gross income, the allowance of a deduction for home mortgage interest, the allowance of a deduction for real property taxes, and the exclusion from gross income of a specified amount of gain on the sale of a principal residence. (266) These tax benefits for homeownership are often viewed as a means of helping individuals realize the "American dream." Indeed, two years prior to the Tax Reform Act of 1986, President Ronald Reagan "explicitly instructed the Treasury Department to 'preserve that part of the American dream which the home mortgage interest deduction symbolizes.'" (267) When President Reagan released his tax plan the next year, he proposed reforms to some of the then-existing housing tax subsidies, but "immunized the [mortgage interest deduction], calling it 'central to American values' and representative of 'America's unequivocal commitment to private homeownership.'" (268) Some twenty years later, President George W. Bush echoed these sentiments:
  [I]n the executive order that established the President's Advisory
  Panel on Federal Tax Reform, one of the very few restrictions was a
  request that the panel 'recognize the importance of homeownership and
  charity in American society.' Some analysts have concluded that the
  Administration's statement indicate[d] its support for preserving the
  mortgage interest deduction along with all of the other homeownership
  tax incentives. (269)


In addition, the tax laws reflect "the extraordinary--probably unique--centrality of the nonprofit sector in American social and economic life." (270) In terms of tax preferences, the importance of nonprofit organizations in American life is reflected in the income, estate, and gift tax deductions for charitable contributions. (271) The perceived importance of charity in American society is not only reflected in the quotation above from President Bush's executive order establishing his tax reform panel, but also in the tax reform plan that President Reagan proposed some twenty years earlier. In his 1985 plan, President Reagan immunized the deduction for charitable contributions from reform efforts on the ground that, like the mortgage interest deduction, it too is "central to American values"-- in this case because of "America's longstanding commitment to charity and voluntarism. (272)

Perhaps less obviously to some, the tax laws reflect not only American dreams but also some unpleasant American realities. Given a long history of de jure and de facto discrimination on the basis of race, it is no wonder that [a]n air of discomfort has always permeated discussions about race" (273) in the United States. The same air of discomfort surrounds discussions of--or, in some cases, the absence of discussion of--sexual harassment. (274) Naturally, the air of discomfort surrounding discussions of both race and gender discrimination can be detected in the tax laws.

Strong and repeated legal condemnations of discrimination on the basis of race and gender would seem to have made it abundantly clear that invidious discrimination in employment is neither an ordinary nor a necessary business practice. (275) Yet, employees who recover damages for discrimination on the basis of race or gender are required to pay tax on those damages while their employers are permitted to deduct those same damage payments as ordinary and necessary business expenses. (276) Drawing on tax expenditure analysis, Karen Brown has argued that taxing the employee on these damages constitutes a tax penalty (i.e., the employee is overtaxed because she is denied a deduction for the costs associated with producing income in a discriminatory workplace) while permitting an employer "a deduction for expenses connected to discriminatory conduct seems a reward." (277) When prohibitions against discrimination are juxtaposed with these tax preferences and penalties, we can clearly see how the law mirrors societal discomfort regarding racial and gender discrimination by sending "mixed messages." (278)

Likewise (and perhaps more obviously), the privileging of the different-sex married couple and the so-called traditional family in American society--as well as the closely associated culture war over same-sex marriage--are all reflected in the pervasive importance of marital status in the tax laws. (279) Marital status (and sexual orientation) impact not only such structural provisions as the determination of the taxable unit, (280) but also the meting out of tax preferences such as the exclusion for employee fringe benefits, (281) the exclusion for employer-provided health insurance, (282) and the exclusion for gain on the sale of a principal residence. (283) In each of these areas, taxpayers are treated differently based on their marital status and sexual orientation--with married different-sex couples being treated better than all others. (284)

The longstanding presence and important expressive function of tax expenditures together betray the quixotic nature of the battle to achieve a more just tax system by closing tax loopholes in an effort to approach ever closer to an ideal tax base. To achieve justice, we must be concerned not only with theory but also with the operation of the law in practice. (285) In practice, tax law is both salient in the public imagination and highly politically charged, notwithstanding academic assumptions and protestations that it is (or, at the very least, ought to be) technical, neutral, and apolitical. (286) Because tax law touches so many areas of so many people's lives, it has come to serve an important expressive function. We use tax preferences and penalties as a means of (consciously or unconsciously) expressing who we are--and, in some cases, a view of how we would like to develop and whom we would like to become. Thus, as illustrated above, whether in arguments about the role of marriage in American society or as a symbol of the American dream, tax law often plays an important cultural role. Given this reality, the goal of tax reform should not be to eradicate tax expenditures from the Internal Revenue Code but to rethink and rehabilitate them so that they better reflect who we are and how we would like to develop as a society.

C. "Reforming" Tax Expenditures

1. Beginning a Public Discussion

With a starting point more grounded in reality, we can shift our focus away from eliminating tax expenditures (in an effort to approximate a theoretically perfect tax base) and toward reforming our tax system as it actually operates (in an effort to reduce manifest injustice and advance human development). (287) A key first step toward this end is to undertake a truly public discussion of what types of lives we value and why we have reason to value them. (288) In other words, focusing on the importance of agency and democratic participation to the human development approach, (289) we need to work together to set our own agenda for advancing our development. An important part of this discussion will involve addressing the equitable distribution and sustainability of our extant and future development. That is, we must particularly focus our attention on (1) how the disadvantaged in our society are now faring and (2) how our decisions today will impact future generations.

In keeping with the holistic view of the human development approach, there must necessarily be a broad discussion that can, in turn, form the basis for assessing the legal and nonlegal, tax and nontax steps that can be taken to achieve these goals and advance our development. The tax system will likely not be the sole means for achieving these goals, but it certainly will have a role to play in advancing our development. (290) Accordingly, we should consider how the tax system might be used to further our development as well as how the role of the tax system coordinates with and either supports or enhances other legal and nonlegal measures to be taken to advance our development.

Tax and nontax legal coordination is not as foreign a concept as one might think. In fact, in the wake of the passage of the Patient Protection and Affordable Care Act (Affordable Case Act), (291) the Department of Treasury worked together with the Department of Labor and the Department of Health and Human Services "to develop regulations and other administrative guidance that will respond to questions and assist stakeholders with implementation" of the health care reform legislation. (292) In developing certain standards, the Affordable Care Act even explicitly required consultation with "a working group composed of representatives of health insurance-related consumer advocacy organizations, health insurance issuers, health care professionals, patient advocates including those representing individuals with limited English proficiency, and other qualified individuals." (293) Moreover, all three Departments "entered into a memorandum of understanding that, among other things, established a mechanism for coordinating enforcement and avoiding duplication of effort for shared jurisdiction." (294) Therefore, cooperation and coordination among federal agencies (as well as between federal agencies and nongovernmental stakeholders) as part of a broader effort to advance human development is not a lofty aspiration; it is already happening.

2. An Example of an Area Ripe for Discussion

Without in any way preempting the necessary public discussion and further recognizing that my purpose here is no more than to shift the focus of tax reform discourse, I would simply like to provide one example of an area that appears ripe for inclusion in this discussion. I will also offer a few thoughts on proposals that we might entertain when considering the role that the tax system (and, more particularly, provisions that could be classified as tax expenditures) might play in advancing human development in this area.

The area that I have in mind is housing. It comes to mind because, as mentioned above, in 2004 the outlay equivalent for the home mortgage interest deduction, which is just one of the tax provisions encouraging homeownership, (295) far exceeded the outlays of the Department of Housing and Urban Development. (296) This large component of federal housing policy (or lack thereof) (297) has come under fire for failing to actually encourage homeownership and for being regressive by disproportionately aiding those who least need help; (298) for disproportionately benefiting white taxpayers over African Americans and Latino/as; (299) for having "a close connection to proliferating [urban] sprawl"; (300) and, in its home equity indebtedness provision, for "amount[ing] to 'a house-sized credit card' for 'consumer-type purchases, the very evil that the interest provisions of the 1986 tax act were designed to eliminate.'" (301)

If we were to put people--and particularly those among us who are disadvantaged--at the center of discussions about housing, we might not so narrowly focus on homeownership. For example, rates of homeownership for African Americans and Latino/as are significantly below those of whites, (302) and a recent study found that homeownership rates for transgender individuals in California were far below the state average. (303) Not everyone will either wish to or have the means to purchase their own home. Perhaps a broader focus would lead us to conclude that what we value is not just homeownership, but access to safe, affordable, accessible, sustainable, and stable housing.

Certainly, we could implement a coordinated set of programs that would aid individuals--and particularly the disadvantaged--in gaining access to safe, affordable, accessible, sustainable, and stable housing. The tax system could play a role in achieving this goal, especially as it relates to affordability. Among the reforms of existing tax preferences and proposals for new tax preferences that one could imagine being offered for consideration (either separately or in combination) as a means of achieving this goal are:
  1. Recognizing that one of the biggest hurdles to homeownership is
  the inability to cover the up-front costs of homeownership (i.e.,
  the down payment and closing costs). (304) we might consider
  reinstating some form of the first-time homebuyer credit that
  expired in 2010 and/or instituting a tax-deferred savings account
  for first-time homebuyers the proceeds of which must be used to
  purchase a home. (305)

  2. Recognizing that not all individuals will (or even wish to)
  become homeowners along with the existing discrimination in favor
  of homeowners and against renters in our tax laws, (306) we might
  consider adopting a refundable renter's credit based on the models
  employed by some states (e.g., Minnesota's renter's property tax
  refund program or New Jersey's property tax deduction/credit),
  which attempt to distribute property tax relief more equitably
  to both homeowners and renters. (307)

  3. Recognizing that the lower rates of minority homeownership
  are due to a long and continuing history of discriminatory
  housing-related practices (e.g., redlining and reverse redlining),
  (308) we might choose not to eliminate the
  home mortgage interest deduction but instead to convert it into a
  refundable credit (to make it available to all taxpayers, including
  many lower- and middle-income taxpayers who do not itemize)" and
  limit its application to areas that have been redlined or reverse
  redlined, while building limits into the credit to provide safeguards
  against predatory lending practices.

  4. Recognizing the history of
  discrimination described immediately above as well as the fact that
  homeowners in areas with more than ten percent African American
  homeownership experience market discrimination (i.e., a drop in
  housing values once this tipping point is reached),") we might
  consider Dorothy Brown's proposal for a time-limited refundable
  credit that would replace both the home mortgage interest deduction
  and the deduction for property taxes in areas with more than ten
  percent African American homeownership--a proposal that would
  both redress this history of discrimination and encourage more
  racially diverse neighborhoods. (311)

  5. Recognizing the importance of the sustainability of development,
  we might consider Roberta Mann's proposal to replace the home mortgage
  interest deduction (and perhaps extend that proposal to replacing the
  deduction for property taxes as well) with a refundable shelter credit
  that would be comprised of (i) a base amount tied to median home
  prices and (ii) a "location efficiency premium" for homes located
  close to public transportation, both of which would tend to discourage
  urban sprawl. (312)


Naturally, which of these (or other) proposals are ultimately adopted would depend on the course of the initial public discussion and the subsequent tailoring of any tax proposals both to meet the chosen goals for our development and to coordinate with any nontax proposals for meeting those goals. As a result, full elaboration of these tax proposals is both premature and beyond the scope of this article.

It is worth underscoring that housing is only one area where the tax system might play a role in advancing human development. (313) Other tax preferences might be reformed or created for the purpose of advancing human development in other areas (e.g., a refundable tax credit to ease the financial burden on those who take unpaid leave under the Family and Medical Leave Act in order to care for a loved one or new child). (314) Moreover, once we recognize that our tax laws mirror the society that created them, there is no reason to limit our horizons to examining only those provisions that can be classified as tax preferences. (315) After all, the local culture can express itself both through structural provisions and tax preferences and penalties. (316) To draw again upon an earlier example, (317) the influence of culture on structural provisions can be seen in the choice of the different-sex married couple as a taxable unit (as well as in the occasional expansion of that taxable unit to the boundaries of the so-called traditional family through the inclusion of the couple's children). (318) We can--and should--consider ways that the tax laws as a whole--both the structural provisions and any putative departures from the chosen baseline (319)--can advance human development.

V. CONCLUSION

The need to focus on people as people, and not as numbers, is, as Mah hub ul Haq and Amartya Sen have both noted, far from a new idea. In a sense, it represents a return to seeing the world through the innocent eyes of a child. Thus, in closing, I would like to end with a quote from my favorite book to read to my daughter before she goes to bed at night, Le Petit Prince (translation below):
  Si je vous ai raconte ces details sur l'asteroide B 612 et
  si je vous ai confie son numero, c'est a cause des grandes
  personnes. Les grandes personnes aiment les chiffres. Quand
  vous kur parkz d'un nouvel ami, elks ne vous questionnent
  jamais sur l'essentiel. Elks ne vous disent jamais:
  [much less than] Quel est le son de sa voix? Quels sont les
  feta qu'il prefere? Est-ce qu'il collectionne les papillons?
  [much greater than] Elle vous demandent: [much less than]
  Quel age a-t-il? Combien a-t-il de freres? Combien pese-t-ii?
  Combien gagne son pere? [much greater than] Alors seulement
  elks croient Ic connaitre. Si vous dites aux grandes personnes:
  [much less than] Pal vu tine belle maison en briques roses,
  avec des geraniums aux fenetres et des colombes sur le toit ...
  [much greater than] elks ne parviennent pas a s'imaginer cette
  maison. II faut leur dire: [much less than] J'ai vu une maison
  de cent mine francs. Alors elks s'ecrient [much less than]
  Cornme c'est joli! [much greater than] (320)


(235.) See supra text accompanying note 216.

(236.) After all, as Amartya Sen has said, "[t]o ask how things are going and whether they can be improved is a constant and inescapable part of the pursuit of justice." SEN, supra note 118, at 86.

(237.) WILLIAM SHAKESPEARE, JULIUS CAESAR act 3, Sc. 2 ("I come to bury Caesar, not to praise him.").

(238.) Abreu & Greenstein, supra note 3, at 321 (quoting Bittker, supra note 212, at 925); see also STAFF OF JOINT COMM. ON TAXATION, 110TH CONG., PUB. No. JCX-37-08, A RECONSIDERATION OF TAX EXPENDITURE ANALYSIS 18 (Joint Comm. Print 2008) ("Surrey further believed that an examination of tax expenditures as if they were spending requests would demonstrate that many of these provisions are inconsistent with the goal of an equitable, efficient and simple income tax system.").

(239.) See supra note 215.

(240.) See supra note 234.

(241.) See supra text accompanying notes 218-221.

(242.) See supra text accompanying notes 218-219.

(243.) See, e.g., Herman Campos, Letter to the Editor, Uphold Benefits for Veterans, MONTEREY COUNTY HERALD, Nov. 11, 2011 ("All of this while refusing to eliminate tax loopholes for big oil . ..."); William Schreffler, Letter to the Editor, Remove Loopholes, Shelters for Large Corporations, PATRIOT NEWS (Harrisburg, Pa.), Oct. 14,2011, at Al0 ("Instead of raising. the tax rate, eliminate the tax loopholes, shelters, credits and subsidies available to large corporations.").

(244.) E.g., OECD, supra note 3, at 85-86; Fleming & Peroni, supra note 190, at 52528. For a listing of the relevant factors to take into account in performing this cost/benefit analysis, see Fleming & Peroni, supra note 222, at 138-39.

(245.) For a number of examples showing the pervasiveness of the notion of tax exceptionalism, see Anthony C. Infanti, .LGBT Taxpayers: A Collision of Others, 13 GEO. J. GENDER & L. (forthcoming 2012). Fleming and Peroni disagree with this characterization. Fleming & Peroni, supra note 222, at 175. But see infra text accompanying note 250.

(246.) David A. Weisbach & Jacob Nussim, The Integration of Tax and Spending Programs, 113 YALE L.J. 955,968 (2004).

(247.) STAFF OF JOINT COMM. ON TAXATION, supra note 238, at 37.

(248.) Cr SEN. supra note 118 (criticizing theories of justice that concentrate on the creation of ideal institutions or sets of rules rather than on realized justice based on comprehensive accounts of how institutions, rules, and choices will actually operate).

(249.) OECD, supra note 3, at 86-87; Fleming & Peroni, supra note 190, at 480.

(250.) See PAMELA J. JACKSON, CONG. RESEARCH SERV., RL 33025, FUNDAMENTAL TAX REFORM: OPTIONS FOR THE MORTGAGE INTEREST DEDUCTION 3-5 (2005) (describing the history of the home mortgage interest deduction and dating the deductibility of home mortgage interest to 19.13); Roberta F. Mann, The (Not So) Little House on the Prairie: The Hidden Costs of the Home Mortgage Interest Deduction, 32 ARIZ. ST. L.J. 1347,1351-52 (2000); Ventry, supra note 189, at 240-41.

(251.) See supra note 192 and accompanying text.

(252.) See supra note 225 and accompanying text.

(253.) See generally Carolyn C. Jones, Class Tax to Mass Tax: The Role of Propaganda in the Expansion of the Income Tax During World War .11,37 BUFF. L. REV. 685 (1989).

(254.) Id. at 733.

(255.) Id.

(256.) Id. at 699,733-36.

(257.) Joseph J. Thorndike, Two Cheers for Loopholes, 111 TAX NOTES 371, 371 (Apr. 17, 2006).

(258.) Id.

(259.) Ventry, supra note 189, at 234-35 (quoting a variety of sources).

(260.) Victor Thuronyi, Tax Expenditures: A Reassessment, 1988 DUKE L.J. 1155, 1158.

(261.) Jeremy Scott, Transfer Pricing Rules Cost Both Jobs arid Revenue, 128 TAX NOTES 453.454 (Aug. 2,2010).

(262.) Anthony C. Infanti, The Ethics of Tax Cloning, 6 FLA. TAX REV. 251, 319 (2003).

(263.) Id. at 320-36 (describing the divergent views on legal "transplants" (or what I have termed legal "cloning") of Otto Kahn-Freund and Alan Watson as well as the common ground that they share--in particular, Kahn-Freund's belief that areas of public law are particularly resistant to transplantation, Watson's restriction of his views regarding the ease of legal transplantation to areas of private law, and their shared belief that a successful legal transplant requires knowledge of the recipient legal environment).

(264.) Jinyan Li, Tax Transplants and Local Culture: A Comparative Study of the Chinese and Canadian GAA R,11 THEORETICAL INQUIRIES L. 655, 683-84 (2010); see also id. at 670 ("The application of a tax rule, including the GAAR, is dependent on the general legal environment in which tax laws are made and interpreted. There are some fundamental differences between the general legal systems in Canada and China that affect how the GAAR operates in reality."); Assaf Likhovski, Is Tax Law Culturally Specific? Lessons from the History of Income Tax Law in Mandatory Palestine, 11 THEORETICAL INQUIRIES L. 725, 730 (2010) ("Tax law occupies an ambiguous position between the more easily transferable areas of law and those areas which are culturally specific, between the universal and the particular. On the one hand, tax law, like other areas of commercial law, is often perceived as technical and, therefore, less culturally specific than other areas. It should therefore prove to be easily transferable. On the other hand, tax law is ultimately based on definitions and notions which are culturally specific."); Michael A. Livingston, Law, Culture, and Anthropology: On the Hopes and Limits of Comparative Tax, 1.8 CAN. J.L. & JURISPRUDENCE 119, 121 (2005) ("Along these lines, 'tax culture' may be defined as the body of beliefs and practices that are shared by tax practitioners and policymakers in a given society and that provide the background or context in which tax decisions are made, i.e., the noneconomic or at least nonquantifiable side of taxation, which varies between societies even though the underlying economic principles are largely the same. Tax culture is thus distinct from the general culture or even the legal culture of a given society, although there is of course no clear line between them: for example, the American frontier tradition, with its emphasis on independence and its fascination With real or imagined risk-taking, plainly affects the public's attitudes toward taxation and as such exercises considerable influence on tax policy-makers. But the two remain conceptually and practically distinct from one another.").

(265.) See, e.g., Likhovski, supra note 264. at 761 ("[I]n fact law is both autonomous and related to society. ...").

(266.) I.R.C. [section][section] 121,163(h), 164(a)(1); STAFF OF JOLN'T COMM. ON TAXATION, 112TH CONG., ESTIMATES OF FEDERAL TAX EXPENDITURES FOR FISCAL YEARS 2011-2015, at 36 (Comm. Print 2012); see, e.g., Jackson, supra note 250, at 1-2 (enumerating the tax benefits of homeownership); Ventry, supra note 189, at 236 ("At the same time, however, the 1913 income tax law violated this principle by excluding from gross income imputed rent from owner-occupied housing, while also allowing offsets for interest and property taxes on that nontaxable form of income.").

(267.) Ventry, supra note 189, at 271-72 (quoting Lou Cannon, Reagan to Keep Home Mortgage Tax Deduction, WASH. POST, May 11,1984, at Fl).

(268.) Id. at 274 (quoting PRESIDENT RONALD REAGAN, THE PRESIDENT'S TAX PROPOSALS TO THE CONGRESS FOR FAIRNESS, GROWTH, AND SIMPLICITY 4 (1985)).

(269.) Jackson, supra note 250, at 1 (quoting Exec. Order No. 13,369, 70 Fed. Reg. 2323 (2005)).

(270.) John Simon, Harvey Dale & Laura Chisolm, The Federal Tax Tratment of Charitable Organizations, in THE NONPROFIT SECTOR: A RESEARCH HANDBOOK 267, 267 (Walter W. Powell & Richard Steinberg eds., 2d ed. 2011).

(271.) I. R. C. [section][section] 170, 2055, 2522; STAFF OF JOINT COMM. ON TAXATION. supra note 266, at 40, 42. But cf William D. Andrews, Personal Deductions in an Ideal Income Tax, 86 HARV. L. REV. 309, 344-75 (1972) (arguing that, in many cases, the deduction for charitable contributions is a refinement of an ideal income tax base rather than a departure from it); Simon, Dale & Chisolin, supra note 270, at 273-74 (discussing the work of others who view the exemption from tax for charitable organizations and the deductibility .of charitable .contributions as serving a tax-base-defining function, but recognizing that the "tax-base-defining rationales have not been widely embraced.").

(272.) PRESIDENT RONALD REAGAN, supra note 268, at 4.

(273.) Leo P. Martinez & Jennifer M. Martinez, The Internal Revenue Code and Latino Realities.- A Critical Perspective, 22 U. FLA. J.L. & PUB. POL'Y 377, 378 (2011); see Jon Hanson & Kathleen Hanson, The Blame Frame: Justifying (Racial) Injustice in America, 41 HARV. C.R.-C.L. L. REV. 413, 457-59 (2006) (describing the media's discomfort with discussing the impact of Hurricane Katrina along lines of race and class).

(274.) See Justine E. Tinkler, Resisting the Enforcement of Sexual Harassment Law, 37 LAW & SOC. INQUIRY I, 1 (2012) (using a small-scale empirical study to explore the "familiar paradox about perceptions of sexual harassment: at the same time that sexual harassment is widely perceived as wrong, the enforcement of policies and the use ot. litigation as a strategy for redressing sexual harassment are often met with resistance."); Deborah Zalesne, Sexual Harassment Law in the United States and South Africa: Facilitating the Transition from Legal Standards to Social Norms, 25 HARV. WOMEN'S L.J. 143, 176-79 (2002) (describing a backlash against a series of U.S. Supreme Court decisions regarding sexual harassment). The absence of discussion of sexual harassment is evident in those workplaces, such as my own, in which the required training is accomplished online, with absolutely no interaction with another human being or discussion of these issues. University Training Resources, U. OF PITTSBURGH, http://www.hr.pitt.edu/training-development/general-courses-training-resources (last visited Aug. 9, 2012).

(275.) See, e.g., 29 U.S.C. [section] 206(d) (2011) (prohibiting sex discrimination in the setting of wages); 42 U.S.C. [section] 2000e-2(b) (prohibiting employment discrimination on the basis of race and sex); Lilly Ledbetter Fair Pay Act of 2009, Pub. L. No. 11.1-2, [section] 2(1), 123 Stat. 5, 5 (statutorily overruling the U.S. Supreme Court's decision in Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), on the ground that it "significantly impairs statutory protections against discrimination in compensation that Congress established and that have been bedrock principles of American law for decades"); Bob Jones Univ. v. United States, 461 U.S. 574, 593 (1983) (upholding the Internal Revenue Service's revocation of the tax exemption of a university with a racially discriminatory admissions policy on the ground that it was not "charitable" and, in support of that decision, noting that, "[o]ver the past quarter of a century, every pronouncement of this Court and myriad Acts of Congress and Executive Orders attest a firm national policy to prohibit racial segregation and discrimination in public education").

(276.) I. R. C. [section] 104(a)(2) (limiting the exclusion for damages based on personal injury to those received on account of "physical injuries or physical sickness"): Treas. Reg. [section] 1.162-1(a) (as amended in 1993) (indicating that a deduction 'otherwise ... allowable under section 162 shall not be denied on the grounds that allowance of such deduction would frustrate a sharply defined public policy"): Rev. Rut. 74-323, 1974-2 C.B. 40 (advertising expenses deductible by an employment agency even though the advertising in question arguably violated the Civil Rights Act of 1964).

(277.) Karen B. Brown, Not Color- or Gender-Neutral: New Tax Treatment of Employment Discrimination Damages,7 S. CAL. REV. L. & WOMEN'S STUD. 223, 26167 (1998).

(278.) See William D. Araiza et al., The Jurisprudence of Yogi Berra, 46 EMORY L.J. 697, 752 (1997) (describing the "mixed messages" sent when "federal law prohibits employment discrimination on the basis of gender, but the tax code provides numerous incentives for a secondary wage earner (the spouse with lower earnings, typically the wife) to work for no pay in the home instead of working in a paying job outside the home, especially if the couple has children") (footnotes omitted).

(279.) See ANTHONY C. INFANT!, EVERYDAY LAW FOR GAYS AND LESBIANS (AND THOSE WHO CARE ABOUT THEM) 136-66 (2007).

(280.) I.R.C. [section] 6013(a) (permitting "[a] husband and wife" to file a joint federal income tax return); Treasury Clarifies Filing Status of Individuals in Illinois Opposite-Sex Civil Unions, 2011 TNT 215-62 (Aug. 30, 2011) (indicating that an Illinois civil union between a man and woman would be treated as a marriage for federal tax purposes). In contrast, the federal Defense of Marriage Act (DOMA) currently prohibits same-sex couples who are either married or parties to a civil union or domestic partnership that is intended to be legally equivalent to marriage from being similarly treated as a taxable unit. Defense of Marriage Act, Pub. L. No. 104-199, [section] 3(a). 110 Stat. 2419 (1996) (codifed at 1 [section] 7 (2012)). For the sake of simplicity, in the text below, I will refer to couples who are legally married or who have entered into a civil union or domestic partnership that is intended to be legally equivalent to marriage as "married" and those who have not entered into any such relationship as "unmarried."

(281.) I.R.C. [section] 132(a)(1), (2), (b), (c), (h)(2); STAFF OF JOINT COMM. ON TAXATION, supra note 266, at 41.

(282.) I.R.C. [section] 106(a); Treas. Reg. [section] 1.106-1 (1960); Prop. Treas. Reg. [section] 1.106-1, 72 Fed. Reg. 46,421 (Aug. 20, 2007); STAFF OF JOINT COMM. ON TAXATION, supra note 266, at 42.

(283.) I.R.C. [section] 121(b)(2)(A)(i); STAFF OF JOINT COMM. ON TAXATION, supra note 266, at 36; see Anthony C. Infanti, Bringing Sexual Orientation and Gender Identity into the Tax Classroom, 59 J. LEGAL EDUC. 3, 14-1.5 (2009) .(explaining how these rules apply differently to same-sex and different-sex couples).

(284.) The constitutionality of section three of DOMA, which currently underpins these differences in treatment, has been cast in doubt by a series of recent judicial decisions. As of this writing, the parties in several of the cases have sought review of these decisions in the U.S. Supreme Court. For a discussion of these cases and of the possible worsening of the legal landscape after "equality" is achieved by striking down section three of DOMA, see generally Anthony C. Infanti, The Moonscape of Tax Equality (Sept. 8, 2012) (unpublished manuscript) (on file with author).

(285.) See SEN, supra note 71, at 69 ("In general, the institutions have to be chosen not only in line with the nature of the society in question, but also co-dependently on the actual behaviour patterns that can be expected even if--and even after--a political conception of justice is accepted by all."). Sen critiqued Rawls's approach to justice on the same grounds:

In the Rawlsian system, the choice of the two principles of justice is meant to ensure both the right choice of institutions as well as the emergence of appropriate actual behaviour on the part of everyone, making individual and social psychology thoroughly dependent on a kind of political ethics. Rawls's approach, developed with admirable consistency and skill, does involve a formulaic and drastic simplification of a huge and multi-faceted task--that of combining the operation of the principles of justice with the actual behaviour of people--which is central to practical reasoning about social justice. This is unfortunate since it can be argued that the relationship between social institutions and actual--as opposed to ideal--individual behaviour cannot but be critically important for any theory of justice that is aimed at guiding social choice towards social justice. Id.

(286.) Infanti, supra note 245.

(287.) Cf. SEN, supra note 71, at 20-22.

(288.) See Paul Krugman, Op-Ed., Oligarchy, American Style, N.Y. TIMES, Nov. 4, 2011, at A31 (reacting to the Congressional Budget Office report discussed in Part I, see CONG. BUDGET OFFICE, supra note 18, and stating "that extreme concentration of income is incompatible with real democracy. Can anyone seriously deny that our political system is being warped by the influence of big money, and that the warping is getting worse as the wealth of a few grows ever larger?").

(289.) See, e.g., supra text accompanying notes 99,112, and 115-118.

(290.) As should by now be clear, the purpose here is not to advocate achieving social justice through the tax system rather than through direct expenditures or other means. Instead, the purpose is to work with the tax system as it already exists and to reform and improve upon it. The tax law clearly has a role to play in discussions of human development and social justice. I am merely recognizing that role and embracing it.

(291.) Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010).

(292.) I.R.S. Notice 2011-36, 2011-21 I.R.B. 792, 792.

(293.) Patient Protection and Affordable Care Act [section] 1001, 124 Stat. at 130, 132; see I.R.S. REG-140038-10, 2011-42 I.R.B. 537, 539 (proposed Aug. 22, 2011) (to be codified at 26 C.F.R. [section]-[section] 54, 602) (mentioning these consultative efforts).

(294.) I.R.S. REG-140038-10,.supra note 293, at 548 (footnote omitted).

(295.) See supra text accompanying note 266.

(296.) See supra text accompanying note 228.

(297.) See Mann, supra note 250, at 1393-94.

(298.) Id. at 1359-68.

(299.) Beverly I. Moran & William Whitford, A Black Critique of the Internal Revenue Code, 1996 Wis. L. REV. 751, 774-76.

(300.) Mann, supra note 250, at 1384.

(301.) Ventry, supra note 189, at 275 (quoting Robert J. Wells, It's Time to Revisit the Interest Deduction Rules, 60 TAX NOTES 649, 652 (Aug. 2, 1993)).

(302.) Dorothy A. Brown, Shades of the American Dream, 87 WASH. U. L. REV. 329, 348 (2009) (indicating that the rate of homeownership among whites was 76% while the rate of homeownership among Asian Americans was 61% and among African Americans and Latino/as was below 50%); see also MELVIN. L. OLIVER & THOMAS M. SHAPIRO, BLACK WEALTH/WHITE WEALTH: A NEW PERSPECTIVE ON RACIAL INEQUALITY 109 tb1.5.4 (1995) (showing a twenty-two percentage point spread between white and black homeownership rates; that is, an overall 63.8-% homeownership rate for whites and an overall 41.6% homeownership rate for blacks); Kenya Covington & Rodney Harrell, From Renting to Homeownership: Using Tax Incentives to Encourage Homeownership. Among Renters, 44 HARV. J. ON LEGIS. 97, 101 fig.1. (2007) (charting homeownership rates among whites and blacks from 1994 to 2005).

(303.) The State of Transgmder (7alifornia Report: Results from the 2008 California Transgender Economic Health Survey, TRANSGENDER LAW CM. 7 (2009), http://www.transgenderlaweenter.org/archives/860.

(304.) Mann, supra note 250, at 1367-68.

(305.) I.R.C. [section] 36; see Covington & Harrell. supra note 302, at 113-16 (proposing a rather limited first-time homebuyer credit); Mann, supra note 250, at 1396 (suggesting the possibility that a proposed shelter credit could be fashioned as a savings vehicle for renters who wish to become homeowners).

(306.) For example, both homeowners and renters pay real property taxes (homeowners directly and renters indirectly), but only homeowners are permitted to deduct those taxes from their gross income for federal income tax purposes. I.R.C. [section] 164; Treas. Reg. [section] 1.164-1(a) (as amended in 1978) ("In general, taxes are deductible only by the person upon whom they are imposed."); Covington & Harrell, supra note 302, at 107.

(307.) MINN. STAT. [section] 290A.04 (2012); N.J. STAT. ANN. [section] 54A:3A-1.8 (West 2012). For a description of these programs, see Renter's Property Tax Refund, MINN. REVENUE, http://www.sevenue.state.mn.us/individuals/prop_tax_refund/Pages/Renters_Property_Tax_Refund.aspx (last updated August 16, 2012); NJ Income Tax--Property Mx Deduction/Credit, N.J. DEP'T OF TREASURY, http://www.nj.gov/treasury/taxation/njit35.shtml (last updated Dec. 12, 2011). But see Renters' Credit Maintained in 2011, Cut in 2012, MINN. BUDGET PROJECT (August 2011), http://www.mnbudgetprojectorg/research-analysis/minnesota-taxes/credits/011-renters-credit.pdf.

(308.) Hanson & Hanson, supra note 273, at 448-49 ("But the opportunity of home ownership was illusory for minorities, due in part to the 'statistically-justified' discriminatory policies of lending agencies. Indeed, of the $120 billion in home loans issued between 1932 and 1962, more than 98% went to white families. Redlining and restrictive covenants reinforced neighborhood racial boundaries. Because blacks were effectively barred from new suburban developments, even newly settled areas reflected stark segregation." (footnotes omitted)); see generally Charles L. Nier, III, Perpetuation of Segregation: Toward a New Historical and Legal Interpretation of Redlining Under the Fair Housing Act, 32 J. MARSHALL L. REV. 617 (1999) (describing the historical origins and continued practice of redlining); Barbara Ehrenreich & Dedrick Muhammad, Op-Ed., The Recession's Racial Divide, N.Y. TIMES, Sept. 13, 2009, at WK17 (describing "reverse redlining" as "intensive marketing aimed at black neighborhoods in the name of extending home ownership to the historically excluded" and explaining its connection with the subprime mortgage crisis); Andrew Martin, Judge Allows Redlining Suits to Proceed, N.Y. TIMES, May 6, 2011, at B9 (describing rulings from two courts that permitted lawsuits to proceed against Wells Fargo that accused the bank of "deliberately steerfinel African-American borrowers who qualified for prime mortgages into subprime loans" and of "approv[ind mortgage refinancing or home equity loans for African-American borrowers even though it knew or should have known that the borrowers couldn't afford the payments").

(309.) For taxable year 2009, the Internal Revenue Service estimated that only 32.5% of all tax returns elected to itemize deductions. INTERNAL REVENUE SERV., PUB. 1304, INDIVIDUAL INCOME TAX RETURNS 2009, at 36 tbl..1.2 (2011). Tax returns reflecting an adjusted gross income of $50,000 or more comprised only about one-third of all tax returns filed for 2009. Id. Nonetheless, of the returns electing to itemize deductions, the Internal Revenue Service estimated that some 70% fell into this group of returns. Id. Moreover, nearly 75% of the returns claiming the home mortgage interest deduction came from this group. M. at 82 tb1.2.1. In contrast, the two-thirds of all returns that reflected an adjusted gross income of less than $50,000 only comprised about 30% of the returns electing to itemize deductions and just slightly more than 25% of the returns claiming the home mortgage interest deduction. Id. at 36 tb1.1.2, 82 tb1.2.1.

(310.) Brown, supra note 302, at 354-60.

(311.) Id. at 371-74.

(312.) Mann, supra note 250, at 1393-96.

(313.) Though a full discussion of this point is beyond the scope of this article, taking a people-centered approach to tax reform might provide reason for abandoning the artificial political constraint that seems to have accompanied talk of tax reform since 1986--revenue neutrality. Shaviro, supra note 220, at 817-1.9. For instance, a focus on sustainable development might require tax reform to raise additional revenue so that development today does not come at the expense of the development of future generations. See supra text accompanying notes 134-138.

(314.) 29 U.S.C. [section] 2612 (2011).

(315.) Indeed, one of the peripheral benefits of adopting a people-centered approach to tax reform is that we can completely bypass unproductive debates regarding the line between structural and nonstructural tax provisions, which have proven to be the Achilles heel of tax expenditure analysis. See supra text accompanying note 224. No group of tax provisions should be spared scrutiny because they are "structural" or part of some "normative" tax baseline.

(316.) See Livingston supra note 264, at 124 (-Max culture may express itself broadly, in the values and goals that the tax system tries to achieve, or more narrowly, in the design of particular institutions and structures.").

(317.) See supra text accompanying note 280.

(318.) See I.R.C. [section][section] 1(g), 6013. 319 Bittker, supra note 212, at 985 ("Mhe income tax structure cannot be discovered, but must be constructed; it is the final result of a multitude of debatable judgments.").

(320.) ANTOINE DE SAINT-EXUPERY, LE PETIT PRINCE 19-20 (1946). Here is my own translation: "If I have told you these details about asteroid 66.12 and if! have confided in you its number, it's because of the grown ups. Grown ups love numbers. When you talk to them about a new friend, they never ask you about the important things. They never ask you: 'What does his voice sound like'? What are his favorite games? Does he collect butterflies'?' They ask you: 'How old is he? How many brothers does he have'? How much does he weigh? How much does his father make'?' Only in that way do they think they know him. If you tell grown ups, 1 saw a beautiful pink brick house with geraniums in the windows and doves on the roof ...' they Cannot manage to picture that house. It's necessary to tell them: 'I saw a 100,000 franc house.' Then they will cry, 'It's so pretty!'"

Anthony C. Infanti *

* Associate Dean for Academic Affairs and Professor of Law, University of Pittsburgh School of Law. Thanks to my faculty colleagues for their feedback on this article at an emerging ideas workshop, when the article was little more than an inchoate idea. Thanks to Francine Lipman and to the participants at the 2012 Critical Tax Conference for comments on an earlier draft of this article.
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Title Annotation:IV. Shifting the Focus of the Tax Reform Debate B. Calling a Truce through V. Conclusion, with footnotes, p. 249-268
Author:Infanti, Anthony C.
Publication:Virginia Tax Review
Date:Jun 22, 2012
Words:8585
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