Susannah Camic Tahk, Public Choice Theory & Earmarked Taxes, N.Y.U. Tax L. Rev. (forthcoming, 2015), available at SSRN.

In 1980, James Q. Wilson, in The Politics of Regulation, predicted that laws with diffuse costs and concentrated benefits would be relatively easy to enact, but that laws with concentrated costs and diffuse benefits would be relatively hard to enact and, once enacted, hard to maintain. This hypothesis, one of the pillars of public choice theory, has long been asserted without empirical verification. Indeed, in 1994, Donald Green and Ian Shapiro, in Pathologies of Rational Choice Theory, challenged the willingness of theorists to accept such unverified predictions as true: “The discrepancy between the faith that practitioners place in rational choice theory [of which public choice theory is a branch] and its failure to deliver empirically warrants closer inspection of rational choice theorizing as a scientific enterprise.” In Public Choice Theory & Earmarked Taxes, Susannah Camic Tahk provides the first rigorous empirical support for Wilson’s hypothesis.

Her study explores the histories of 1497 state-level earmarked taxes between 1997 and 2005. Earmarked taxes, in general, produce more concentrated benefits than taxes the proceeds of which flow into a state’s general fund. Thus, we would expect earmarked taxes to perform strongly as revenue generators. And, indeed, Tahk finds that the earmarked taxes in her sample raised 58.39% more revenue in 2005 than in 1997—a larger percentage increase than any major federal tax over the same period. Continue reading "An Empirical Test of Public Choice Theory"

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