Converging Welfare States: Symposium Keynote

Susannah Camic Tahk, Associate Dean for Research and Faculty Development and Associate Professor of Law at the University of Wisconsin Law School, speaks to the Journal of Civil Rights and Social Justice 2018 symposium, Always with Us? Poverty, Taxes, and Social Policy. She addresses the following questions: To what extent do the particular advantages of the tax antipoverty programs persist as the tax antipoverty programs take center stage? Can tax programs, once distinguished from their direct-spending counterparts on the grounds of relative popularity and legal and administrative ease of access maintain those hallmarks as the tax-based welfare state grows in size and scope? The first of the tax antipoverty programs was the EITC, a small, nimble program easily administered on a tax return, often meant to encourage people who might otherwise be receiving welfare to go to work. Now, the EITC at the foundation of our federal antipoverty apparatus. What are the consequences? How much have the EITC and its now-lengthy list of companion tax antipoverty programs, retained the advantages of the supplemental welfare state it once was? Or, instead, are the tax antipoverty programs starting to resemble the behemoth direct-spending programs they’ve replaced in the center of the U.S.’s social policy landscape? To what extent can we expect tax programs become more like direct-spending programs, or “welfare” over time? Will the trajectories of the tax antipoverty programs and the direct-spending programs converge

The New Welfare Rights

Participating in the tax system gives rise to what could be enormously powerful rights for poor people. The tax system has become one of the main tools the United States uses to fight poverty. A thick bundle of tax rights accompanies the many tax antipoverty programs. This paper is the first to recognize the potentially substantial rights that poor people have through the tax code. For decades, poverty law advocates and scholars have lamented the decline of the “welfare rights” that poor people once had in their benefits. No one has yet recognized that in fact poor people still have substantial rights in the tax code. These “new welfare rights” are not rights that lawmakers are attempting to weaken but rights that they are strengthening. However, lawyers and lawmakers have yet to unlock the potential that tax rights have to improve the lives of poor people. This paper discusses two methods by which this can happen. First, poverty lawyers can make rights-based legal claims on behalf of their clients, several of which this paper will discuss. Second, lawmakers can use rights-based ideas to help tax administration protect poor taxpayers’ rights more effectively. This paper presents the results of a survey experiment that suggests just one way to redesign existing programs to protect poor taxpayers’ rights

Crossing the Tax Code\u27s For-Profit/Nonprofit Border

The federal tax code erects and enforces a firm border between forprofit and nonprofit organizations. Multiple provisions of the code monitor the boundaries of the tax-exempt, or nonprofit, sector to ensure that no nonprofit organization slips across the border to become a forprofit organization. Other code provisions restrict entry into the taxexempt sector by for-profit organizations. Despite serious legal impediments, however, organizations on both sides of the boundary have increasingly found means by which to cross the border. Arrangements such as corporate social responsibility, for-profit philanthropy, and social enterprise illustrate this recent trend. Through these arrangements, forprofit organizations are beginning to embrace social goals, while nonprofit organizations have started to use methods more traditionally associated with efficient business organizations. Research in organizational sociology provides tools by which to understand these new cross-border developments. This body of research has shown that organizational sectors, or fields, evolve according to well-understood patterns, whose significance tax scholars have overlooked. Furthermore, federal tax law has failed to recognize and to make productive use of these organizational trends. This Article proposes that tax law should acknowledge the cross-sector movements of for-profit and nonprofit organizations, as well as the major advantages that these movements can produce. Tax law could then harness border-crossing activity to create social benefits. To achieve this result, federal tax law should loosen the for-profit/nonprofit boundary. This change would enable the tax code to encourage cross-sector collaborations between for-profit and nonprofit organizations. This change to the tax law is one that Congress and the Internal Revenue Service could now accomplish through several basic measures. These measures would make it possible for federal tax law to realize the large potential for social good that lies at the changing forprofit/ nonprofit border

Tax-Exempt Hospitals and Their Communities

Hospitals in the U.S. have long been able to obtain exemption from federal income tax because they meet the requirement known as the standard of "community benefit." Yet lawmakers and scholars know virtually nothing about the actual workings of tax-exempt hospitals, or about whether, how, and to what extent they deliver benefits to their communities. Within the last five years, however, IRS tax return forms have started asking hospitals to quantify these benefits, as well as to give detailed information about their financial practices with respect to their patients. These new questions coincide with new requirements for tax-exempt hospitals put in place as part of the 2010 Affordable Care Act. The new tax return data offer a first-time opportunity to evaluate the workings of tax-exempt hospitals from the perspective of both the traditional requirements for tax-exempt hospitals and the 2010 healthcare reforms of the Affordable Care Act. This Article analyzes data from all tax-exempt hospitals in the U.S. in 2012 to show that tax-exempt hospitals differ widely in their provision of community benefits (and financial practices). In particular, these activities vary systematically in relation to their different notions of "community" and the characteristics of the communities where the hospitals are located. This evidence demonstrates that tax-exempt hospitals seem to be responding to the specific needs of their own communities when allocating their resources among different community-benefit activities. The data show, in addition, that while tax-exempt hospitals are generally adopting the financial policies that Congress and the IRS are requesting, hospital financial aid policies also vary by community. These findings raise several fundamental questions for lawmakers and tax policy scholars in the era of the Affordable Care Act. In particular, the findings suggest that lawmakers need to grapple seriously with how they allow tax-exempt hospitals to define their communities. For example, is it appropriate for tax-exempt hospitals merely to benefit a narrowly defined community or should they operate in terms of a broader understanding of community? In light of the new data presented, this Article considers these questions and outlines several alternatives to the "community benefit" standard to address them

Making Impossible Tax Reform Possible

The United States has long struggled to reform its federal income tax code. Despite enthusiastic and widespread bipartisan support for tax reform laws that would eliminate special–interest loopholes, the legislative process has been paralyzed when it comes to passing these laws. This Article proposes a solution to this seemingly intractable federal tax lawmaking paralysis. This paralysis arises because tax reform spreads its benefits among broad groups while concentrating its costs on narrow ones. Political science theory accurately predicts that laws with this cost–benefit allocation will fail. However, federal lawmakers can overcome tax lawmaking paralysis by distributing tax reform’s costs and benefits differently. In particular, the federal government can do this by following the examples of states that have successfully escaped tax lawmaking paralysis by earmarking taxes for specificpurposes. This Article examines the phenomenon of earmarking and examines several instances of earmarked state taxes. In so doing, this Article argues that earmarking tax revenues for particular purposes offersan opportunity for lawmakers to permanently reform the tax code at last