David I. Walker (Boston University) presents Suitable for Framing: Business Deductions in a Net Income Tax System at Florida State today as part of its Faculty Enrichment Series hosted by Gregg D. Polsky. Here is the abstract:

The federal income tax code includes numerous provisions disallowing or curtailing income tax deductions related to such disparate activities as providing non-performance based compensation to senior corporate executives and business lobbying. The primary claim of this article is that mental and rhetorical framing of business deductions as subsidies helps explain these provisions. The traditional “public policy” disallowances directed at lobbying, fines and penalties paid by businesses, and antitrust treble damages respond to an appearance of a taxpayer subsidy that would follow from deduction, despite the fact that it is far from clear that these deductions, if allowed, would represent subsidies in an economic sense. Disallowances directed at executive pay and other corporate governance matters also trade off an appearance of subsidy. In these cases, structuring an economic disincentive as a tax disallowance (versus economically equivalent direct regulation) and rhetorically framing the intervention as the elimination or curtailment of a subsidy create an illusion of lesser regulatory intervention that helps overcome opposition to the legislation by laissez faire politicians and constituents. The normative implications of mental and rhetorical framing of deduction as subsidy are troubling. It is becoming increasing clear that disallowed deductions generally are a poor means of implementing economic policy, and the power of subsidy framing and rhetoric provides another reason to be skeptical of economic regulation incorporated in the tax code.