Theories of Personal Deductions in the Income Tax
![handle is hein.journals/hastlj40 and id is 369 raw text is: Theories of Personal Deductions
in the Income Tax
by
THOMAS D. GRIFFITH*
Personal deductions have an enormous impact on the revenues
raised by the federal income tax. The medical deduction and the exclu-
sion of employer-provided health insurance alone are estimated to reduce
tax revenues by nearly thirty billion dollars annually.' Additional bil-
lions of dollars of potential tax receipts are lost by allowing deductions
for charitable contributions, nonbusiness state and local taxes, and inter-
est on owner-occupied dwellings.2 It is not surprising, then, that per-
sonal deductions have been a popular subject of tax scholarship. Though
much of the tax literature in this area focuses on the merits of particular
code provisions, some scholars have offered more general theories of the
appropriate role of personal deductions in an income tax. Three of these
theories are particularly important.
The tax expenditure model advocated by the late Stanley Surrey is,
perhaps, the most prominent theory.3 The tax expenditure model treats
* Associate Professor of Law, University of Southern California Law Center. A.B.
1971, Brown University; M.A.T. 1972, Harvard Graduate School of Education; J.D. 1982,
Harvard Law School.
Early drafts of this Article were presented at the University of Southern California Work-
shop Series and to the Southern California Tax Policy Group, and benefited from comments
made by members of those groups. In addition, I would like to thank Joseph Bankman, Linda
Beres, Pat Cain, Richard Craswell, Catherine Hantzis, William Klien, Norman Lane, Marty
Levine, Gwen Quillen, Judy Resnik, Adrienne Cohen, John Stick, and Jeff Strnad.
1. For fiscal year 1987, revenue losses from the exclusion of employer-provided health
insurance were estimated at $23.3 billion and from the deduction for medical expenses at $3.1
billion. BUDGET OF THE UNITED STATES GOVERNMENT, 1988, SPECIAL ANALYSIS G, at 45
(1987) [hereinafter 1988 SPECIAL ANALYSIS G].
2. The revenue losses from the deduction for charitable contributions were estimated at
$11.1 billion ($870 million for education, $1.27 billion for health, and $9 billion for other
charities), the losses from the deduction for nonbusiness state and local taxes (other than taxes
on owner-occupied housing) were estimated at $18.8 billion, and the losses from the mortgage
interest deduction on owner-occupied dwellings were estimated at $24.9 billion. Id. at 43-46.
3. Surrey, as Assistant Secretary of the Treasury for Tax Policy from 1961 through
1969, urged the development of the tax expenditure concept by the Treasury and oversaw the
calculation of the first tax expenditure budget for fiscal year 1968. After leaving the Treas-
ury, Surrey joined the faculty of Harvard Law School and wrote a series of articles and books,
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Theories of Personal Deductions in the Income Tax
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