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Charitable Giving, Tax Expenditures, and Direct Spending in the United States and the European Union

By Lilian V. Faulhaber

Abstract

This Article compares the ways in which the United States and the European Union limit the ability of state-level entities to subsidize their own residents, whether through direct subsidies or through tax expenditures. It uses four recent charitable giving cases decided by the European Court of Justice (ECJ) to illustrate the ECJ\u27s evolving tax expenditure jurisprudence and argues that, while this jurisprudence may suggest a new and promising model for fiscal federalism, it may also have negative social policy implications. It also points out that the court analyzes direct spending and tax expenditures under different rubrics despite their economic equivalence and does not provide a clear rule for distinguishing between the two, adding to the confusion of Member States and taxpayers. The Article then surveys the US. Supreme Court\u27s Dormant Commerce Clause jurisprudence, under which the Court analyzes discriminatory state spending provisions. The Article concludes that although both the Supreme Court and the ECJ prioritize formalism over economic equivalence, the Supreme Court\u27s approach to tax expenditures is more defensible than that of the ECJ due to the different federal structures of the two jurisdictions

Topics: Law
Publisher: Yale Law School Legal Scholarship Repository
Year: 2014
OAI identifier: oai:digitalcommons.law.yale.edu:yjil-1442
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