One Group’s Preference Is Another’s Penalty

• Various preferences undoubtedly are popular with those whom they favor, but they come at a cost

  • Lower revenues available for services, or higher rates on remaining tax base, or some combination of the two
  • Violation of horizontal equity principle
  • Weakening of other principles as well – e.g., revenue adequacy and simplicity

“In the tax game, . . . What is a privilege to some group of people is a penalty to everyone else because it forces up tax rates.” Joel Slemrod and Jon Bakija, Taxing Ourselves: A Citizen’s Guide to the Great Debate over Tax Reform, 2nd ed(MIT Press, 2000), p. 77. [Revenue-neutral rates assumed.]

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