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36 Va. Tax Rev. 1 (2017)
Virtue's Reward: A (Qualified) Defense of Infra-Marginal Tax Subsidies

handle is hein.journals/vrgtr36 and id is 7 raw text is: VIRTUE'S REWARD: A (QUALIFIED) DEFENSE OF INFRA-MARGINAL TAX SUBSIDIES Daniel E. Herz-Roiphe. Conventional wisdom holds that tax expenditures are supposed to change taxpayer behavior, and therefore work best when they target taxpayers at the margin of performing some behavior or not. But what if, instead of viewing tax expenditures as incentives, we thought of them as rewards for virtue? This Essay explores why we might do so and what it would mean for tax analysis. It proposes two alternative ways of thinking about tax expenditures: a desert-based account in which expenditures compensate taxpayers for socially productive activity, and an expressivist account in which expenditures articulate a community's moral judgments by rewarding favored conduct. Both of these theories have analogues that are often invoked to justify criminal punishment, yet both are usually overlooked by tax scholars. If we brought them into the tax conversation, tax analysts would have to rethink their opposition to expenditures for infra-marginal behavior, since infra-marginal actors are no less virtuous-and arguably more virtuous-than their marginal counterparts. Desert-based and expressivist arguments provoke the obvious objection that it is inappropriate for the tax code to self-consciously identify and reward virtue. The Essay acknowledges this concern-which is why its defense of infra-marginal subsidies is only qualified-but argues that it is difficult to reconcile staunch opposition to rewarding virtue through tax expenditures with the realities of our tax code and broader legal system. Given the significant role that moral judgment already plays in how the state hands out tax benefits-not to mention criminal punishments- ignoring desert-based and expressivist arguments for tax expenditures requires a kind of willful blindness. The Essay concludes that we should instead acknowledge the force of these arguments in order to better understand the tradeoffs implicated by tax policy decisions. * Law Clerk, Justice Stephen G. Breyer. The author thanks Anne Alstott, Phoebe Clarke, David Grewal, Lev Menand, and Zach Liscow for their helpful comments and criticism.

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