Bloomberg, Court Backs Separation of Tax and Spending in Church-State Case, by Richard Rubin:
The U.S. Supreme Court, in a case involving separation of church and state, provided rhetorical backing for congressional Republicans who argue that government grants and tax credits aren’t equivalent.
The court yesterday upheld an Arizona program that gives taxpayers a credit for contributions made to groups that provide scholarships to private schools, including religious institutions. The 5-4 majority on the court said such tax expenditures, unlike spending programs, involve private funds that don’t reach the government’s coffers.
“When the government collects and spends taxpayer money, governmental choices are responsible for the transfer of wealth,” Justice Anthony Kennedy wrote for the majority. “Here, by contrast, contributions result from the decisions of private taxpayers regarding their own funds.” That distinction led the majority to determine that the taxpayers suing Arizona lacked standing, or the right to challenge the program as a constitutional violation. Politically, the decision provides support for lawmakers who argue against lowering the budget deficit by curbing tax expenditures, no matter how much they resemble spending programs.
“Cases like this encourage more government spending, rather than less,” said Edward Kleinbard, a law professor at the University of Southern California and former chief of staff of the congressional Joint Committee on Taxation. “It simply encourages that spending to take the form of ever sillier tax credits and other targeted tax breaks.” …
The question of whether tax expenditures are equivalent to spending has been roiling the Republican Party in recent months. …
If tax credits aren’t considered government spending, [Kleinbard] said, Congress could just add pages to the income tax form to give tax filers an unlimited number of credits and decisions about how to spend them. “And then having done that,” Kleinbard said, “we will declare that we’ve shrunk the size of government to zero.”
