A Proposed Replacement of the Tax Expenditure Concept and a Different Perspective on Accelerated Depreciation

The thesis of this article is that the tax expenditure concept is grounded on an erroneous vision of the structure of an income tax system. The tax expenditure concept adopts a binary view of income taxation. It posits that there is an ideal or pure income tax system whose provisions are elements of the normal structure of that system without any influence from non-tax policy considerations. Tax provisions are described either as falling within those core provisions or outside of them. There are no other categories. To the contrary, this article contends that tax provisions lie on a continuum in which some are in the core and some are at different distances from the core. The author contends that virtually all tax provisions, including those within the core, reflect policy considerations. The decision whether to adopt or retain a provision takes into account both its proximity to the core and also the economic and societal consequences (both positive and negative) that the provision will cause. There is no universal tax system for all times. Tax laws are (and should be) constructed to coordinate with the needs and values of society as they change over time. The article also contends that there is not just one proper method of depreciation, and that accelerated depreciation is as consistent with neutral tax principles as is straight line depreciation