The integration of tax and spending programs

This Article provides a theory for deciding when a spending program should be implemented through the tax system. The decision is traditionally thought to be based on considerations of tax policy. The most common theories are the comprehensive tax base theory and the tax expenditures theory, both of which rely on tax policy to make the determination. This Article argues instead that the decision should be based solely on considerations of organizational design. Activities should be grouped together in a way that achieves the best performance, much like how a corporation decides to divide its business into divisions. Tax policy is entirely irrelevant to the decision. This Article begins the process of applying organizational design theory to the integration problem, considering theories of hierarchies based on the needs for specialization in and coordination of activities. It then analyzes whether food stamps and the Earned Income Tax Credit should be implemented through the tax system based on this analysis.