Previously posted on SSRN.

Abstract

Stanley Surrey is perhaps best known for his promotion of the concept of tax
expenditures—the characterization of various tax preferences as substitutes for
direct expenditures. That emphasis understates his lasting influence on the tax
policy process. An equally important and lasting achievement was establishing
and promoting the integrity and professionalism of the Treasury’s Office of Tax
Policy (OTP), while garnering the support of much of the wider tax policy
community for basing tax policy on the principles of fairness, simplicity, and
efficiency.

In this article, we focus mainly on historical developments in the concept and
use of tax expenditures both in the United States and abroad. We provide special
attention to the significant role played by tax expenditures in the movement that
led to the Tax Reform Act of 1986, which is the type of effort that Surrey
championed. We relate tax expenditures to other base-defining measures such as
economic income, consumption, and ability to pay in both development of that
Act and within the continuing tax policy debate.

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