Tax expenditures are deviations from a normative tax structure which take the form of exemptions, deductions, credits, etc. Tax expenditure reports show estimates of revenues foregone from tax expenditures. This study investigated report use in ten states by (1) examining tax expenditure reporting processes and report use and (2) applying three path models of technical information use to tax expenditure reports. Data were gathered from report preparers-legislative staff persons and legislators. The adoption of recommended standard features was examined. Commonly adopted core features and innovative features were identified. Examination of tax expenditure reports and reporting processes supports the following findings: (1) The tax expenditure concept has broad acceptance. (2) Reporting achieves an educational objective by facilitating an understanding of tax structure. (3) Use of reports is consistent with the use of technical information in general. (4) Legislators and staff persons share similar perceptions on reporting. (5) The practice of formally comparing tax and direct expenditures has not been widely adopted. (6) Awareness of tax expenditure costs may protect revenues by fostering resistance to new tax expenditures. In the three specified path models of information use, the dependent variable is level of report use. The independent variables in each model represent three theory of information use. The most paths were retained as significant in the information specific model, but the individual attribute model explained the highest percentage of variance in level of use (28.1%). The role constraint model was unsupported. A final combined model, explaining 34.3% of variance in level of use, shows that the information specific and personal attribute models are related. In the combined model: (1) report usefulness has the largest direct and total effect on level of use, (2) the exogenous variables, quality of report communication and fiscal analysis attitude affect report usefulness by affecting the intervening variables, relevance of report and technical quality of report. This suggests report preparers may influence marginally report use by improving report communication and technical quality of reports. / Ph. D.

Thesis (M.C.P.)--Massachusetts Institute of Technology, Dept. of Urban Studies and Planning, 1980. / MICROFICHE COPY AVAILABLE IN ARCHIVES AND ROTCH. / Bibliography: leaf 140. / by Joan Chalmers Williams. / M.C.P.

The purpose of this dissertation is to examine an unexplored aspect of tax expenditures: the tax-price implications of tax exemptions, deductions and credits. Although this implication of tax expenditures has not been adequately examined, two separate lines of analysis have been suggested by the existing literature. Some authors have emphasized the welfare costs of tax expenditures. To the extent that tax expenditures narrow the tax base the introduction or extension of a tax expenditure undoubtedly makes the cost of raising revenue more than it would be otherwise. This kind of cost, denoted as a welfare cost, can be incorporated into a model of individual tax-price determination. On the other hand, other authors have emphasized another tax-price implication of tax expenditures: that the introduction or extension of a tax expenditure changes the cost-shares faced by each taxpayer, exclusive of any welfare cost. Since an individual's cost-share is nothing more than his personal tax base divided by the aggregate tax base, this result emerges because a tax expenditure usually changes the individual's tax base in a manner disproportionate to the change in the aggregate tax base. This dissertation will explore and combine each line of analysis, both theoretically and empirically. In the first portion of the dissertation a model of tax-price determination is developed that explicitly incorporates the welfare cost of taxation. Various tax expenditures are then introduced into the model and their effects on individual tax-price schedules discerned. In this way the influence a tax expenditure has on an individual's choice over public sector size can be surmised. The next portion develops within the confines of a simple median voter model some potential allocative implications of various tax expenditures. This portion traces out the expected change in the median voter's desired quantity of the collective good, given various tax expenditures, via an analysis of the cost-share impact of the various tax expenditures. Although in this section welfare costs are not explicitly considered or all possible political cases outlined, the analysis does look at a set of cases that are of general interest. The final portion of the dissertation considers the influence tax expenditures taken in toto have on both the cost-sharing arrangement among individual taxpayers and the welfare cost to individual taxpayers. The results are used to gauge both the distributive and allocative implications of tax expenditures. / Ph. D.