This article was downloaded by: [Yarmouk University] On: 20 February 2012, At: 21:53 Publisher: Routledge Informa

Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK

International Journal of Public Administration

Publication details, including instructions for authors and subscription information: http://www.tandfonline.com/loi/lpad20

Criteria for evaluating revenue options: a comprehensive view

Daniel W. Williams & Blue Wooldridge
a a b

School of Public Affairs, Baruch College, 10010, New York, New York
b

Department of Political Science and Public Administration, Virginia Commonwealth University, 23284-2028, Richmond, Virginia Available online: 26 Jun 2007

To cite this article: Daniel W. Williams & Blue Wooldridge (1999): Criteria for evaluating revenue options: a comprehensive view, International Journal of Public Administration, 22:11-12, 1507-1533 To link to this article: http://dx.doi.org/10.1080/01900699908525439

PLEASE SCROLL DOWN FOR ARTICLE Full terms and conditions of use: http://www.tandfonline.com/page/ terms-and-conditions This article may be used for research, teaching, and private study purposes. Any substantial or systematic reproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in any form to anyone is expressly forbidden. The publisher does not give any warranty express or implied or make any representation that the contents will be complete or accurate or up to date. The accuracy of any instructions, formulae, and drug doses should

be independently verified with primary sources. The publisher shall not be liable for any loss, actions, claims, proceedings, demand, or costs or damages whatsoever or howsoever caused arising directly or indirectly in connection with or arising out of the use of this material.

Downloaded by [Yarmouk University] at 21:53 20 February 2012

INT'L. J. OF PUB. ADMIN., 22(11&12), 1507-1533 (1999)

CRITERIA FOR EVALUATING REVENUE OPTIONS: A COMPREHENSIVE VIEW

Downloaded by [Yarmouk University] at 21:53 20 February 2012

Daniel W. Williams School of Public Affairs Baruch College New York, New York 10010 and Blue Wooldridge Department of Political Science and Public Administration Virginia Commonwealth University Richmond, Virginia 23284-2028

ABSTRACT
We identify twenty-nine criteria that are proposed for decision makers to use when they consider revenue measures and classify these criteria into four categories: adequacy, neutrality, consent and fairness. This discussion offers the decision maker help in deciding how to select revenue measures.

INTRODUCTION
Adam Smith offered these views on public revenues:

Copyright O 1999 by Marcel Dekker, Inc

1508

WILLIAMS AND WOOLDRIDGE

Downloaded by [Yarmouk University] at 21:53 20 February 2012

I. The subjects of every state ought to contribute towards the support of the government . . . in proportion to the revenue which they . . . enjoy under [its protection]. . . . 11. The tax which each individual is bound to pay ought to be certain, and not arbitrary, . . . 111. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient. . . . IV. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury . . . . [A tax may take] a great deal more than it brings into the public treasury. . . . [First] it may require a great number of officers. . . . Secondly, it may obstruct the industry [of] the people. . . . [Thirdly, it may ruin those] who attempt unsuccessfully to evade the tax . . . . Fourthly, by subjecting the people to the frequent visits and the odious examination of the tax-gatherers, it may expose them to much unnecessary trouble, vexation, and oppression. . . .(I) In modern times Arons~n,(~) Bahl,(3)E~kstein,'~) Mike~ell,(~) Moak and Hillh~use,(~) Pe~hrnan,'~) Pierce and Rust,@) Reed and S ~ a i n , ' ~Rickards and Maeda,(lo) Rostvold,(") Schultz and ' Harriss,(12) and the Senate Joint Economic Committee,(13)among many others recommend numerous criteria for selecting revenue measures. Their lists range from three items to ten or more. It is difficult to know whether any list is complete or even whether listed criteria are compatible with each other. As they might be cited to support almost any position, they are vulnerable to Herbert Simon's complaint(14"--perhaps are just so many proverbs. We they comprehensively identify criteria and organize them into four categories--adequacy, neutrality, consent, and fairness. As these are not logically exclusive categories, some criteria fit several and we sometimes discuss similar criteria in several categories. In the last section, we discuss use of these criteria in decision making.

CRITERIA FOR EVALUATING REVENUE OPTIONS

1509

ADEQUACY

"Governments have therefore multiplied partial taxes. They have taken wherever they have found any thing to take. . . ."(15)
A revenue system should raise enough funds to meet operating costs, pay for public policies and maintain an infrastructure. If it fails to meet these needs or pays for non-capital costs through borrowing, it is inadequate. The adequacy-related criteria we find include yield, stability, elasticity, diversity, flexibility, recurrence, investor risk, feasibility, administrative costs and capacity.

Downloaded by [Yarmouk University] at 21:53 20 February 2012

Yield The amount of money produced by a revenue measure depends on base and rate. For taxes, the base is the item taxed, such as income. Rate is the amount of revenue for each unit of the base. It may be a fixed amount, a fixed ratio of the base, or a ratio that varies according to some attribute of the base. A broad base leads to a high yield.('@ Exclusions and exemptions, sometimes called tax expenditures, reduce the base and the yield. Tax expenditures that reduce the rate include deductions, credits and collection allowances. The base may be elastic to rate--as the rate increases, the base may shrink.(17) Yield is improved when the base declines slowly in response to the rate increases. Stability Some revenue bases fluctuate with the economy.(18)During recessions, governments that depend on such revenues may have to cut services, raise tax rates or which can aggravate economic conditions and reduce tax acceptability. Revenue systems should be relatively unaffected by fluctuating economic

1510

WILLIAMS AND WOOLDRIDGE

conditions. Stability is achieved by using bases that are inelastic to economic conditions, such as a property tax.
Elasticity

Downloaded by [Yarmouk University] at 21:53 20 February 2012

From the elected official's view, the revenue structure should provide enough growth to pay for recurrent expenditures.@)This growth, sometimes called elasticity, is produced either when the base grows faster than the economy or when the base stays abreast of the economy and there is natural growth in the rate, as with personal income tax rates before they were indexed to inflation. Absence of such growth is associated with fiscal stress in central cities in the United States.@')Nevertheless, it is sometimes argued that elasticity is not desirable, because it shields government revenues from review through democratic institutions.
Diversity

Stability and elasticity are at odds with each other. Revenues that grow rapidly in good times collapse when the economy turns sour. This problem is solved by mixing revenue sources that include some items that grow with the economy and others that produce stable yields.(22) Such a revenue system will not completely escape democratic review; however, the need for new revenue measures will not be so frequent as to keep the public agitated.
Flexibility

Decision makers need the ability to redirect revenue flows to meet new policy needs or to respond to shortfalls.(23) Flexibility is limited by entitlements and earmarking. Entitlements are treated

CRITERIA FOR EVALUATING REVENUE OPTIONS

1511

as privileged budget categories that must be funded before other categories can be considered. Earmarking locks the budget into categories that may become outdated over time or irrelevant in hard times, and may allocate a sum of money unrelated to needs within the earmarked category. Although decision makers may prefer to avoid this Balkanization of revenues, it may be the only way to raise essential revenues.
Downloaded by [Yarmouk University] at 21:53 20 February 2012

Recurrence

Balance between revenues and expenditures should be found in recurrent commitments.W) A government that simply offsets dwindling revenues by liquidating assets or capitalizing operating does not address the critical gap between costs and capacity. This does not mean that governments should never reduce surpluses or sell assets. Selling assets to reduce related costs is reasonable. Also, assets may be accumulated for infrequent high-cost expenses,(26) including economic downturns. Balanced consumption of reserves when needed simply follows a plan. However, asset consumption should be accompanied by either structural change or realistic expectations of higher revenues. A related consideration is that government assets may be more than simple capital possessions. The selling of public assets may irreversibly eliminate public goods, as with selling of ancient forests for lumbering. Such action should not be viewed as merely exchanging one sort of asset for another.
Investor Risk

When governments raise revenue through investments, they incur the same risks as other investors.(27)An adequate revenue system must balance the generation of investment revenue with the risk of lost principle.

1512

WILLIAMS AND WOOLDRIDGE

Feasibility Revenue policies must be considered in the context of cultural and administrative capacity. Feasibility issues may be idiosyncratic to particular revenue measures and governments. Matters to consider are literacy, costs, the availability of techniques,(28) the and proven productivity of the revenue source. Only feasible revenue measures produce actual funds. Administrative Costs Collection costs reduce yield so they should be small. Van Der Hoek's rule of thumb limits collection costs to 10%of revenue generated.(29) Schultz and Harri~s'~O) identifjr four sources of variation in tax administration costs: (1) the work done to collect the tax; (2) tax base and rate (small bases are associated with larger relative administrative costs and higher rates are associated with lower proportional collection costs); (3) productivity in the revenue office; and (4) administrative effort. Compliance costs are collection costs borne by the payer. They range from professional fees to inconvenience. They differ according to the character of the tax, its base and rate, and taxpayer effort and efficiency. As they use resources that could be left with the payer or collected as revenue; they should be minimized. Capacity Adequacy must be balanced against capacity. Regardless of a government's need for revenue, it must stop considerably short of confiscation. Indeed, it must leave most resources in private hands and allow the base to grow. The need for political consent sets this requirement, but it is also part of the need for adequacy itself.

Downloaded by [Yarmouk University] at 21:53 20 February 2012

CRITERIA FOR EVALUATING REVENUE OPTIONS

1513

If capacity is ignored, short-term revenue goals are met through sacrifice of longer-term adequacy.
NEUTRALITY

Downloaded by [Yarmouk University] at 21:53 20 February 2012

"One should not be deterred from improving his possessions for fear lest they be taken away from him or another from opening up trade for fear of taxes. "(") Efficient revenue measures avoid distorting economic decisions that would be made in an otherwise optimal market.(32) An example of a neutral revenue measure is a head tax. In the actual world, the market is not optimal and taxes are not neutral to decision making.(33) much as possible, variation from neutrality As should be intentional and should benefit society. Economic criteria that we consider are economic policy, disruption, economic dampening, regional variation, regulatory effect and compatibility with public policy.
Economic Policy

Governments should consider how revenue measures impact the economy. Consider traditional state government rejection of deficit spending. When revenue declines during recessions, states may raise taxes or reduce services, either of which can worsen recessions. States can avoid this trauma is by establishing reserves so that they will be available during downturns. The federal government also uses tax policies as one of its mechanisms for automatic stabilization of the economy.
Disruption

When governments change revenue strategies abruptly they may disrupt the economy. For example, shifting from broad-based

1514

WILLIAMS AND WOOLDRIDGE

general revenues to narrower revenues in a single sector may disrupt economic activity in that sector.(34) One way to avoid disruption is to phase in shifts over several years.
Economic Dampening
Downloaded by [Yarmouk University] at 21:53 20 February 2012

Some revenue policies can discourage economic activity.(3s) For example, it is widely argued that taxing capital gains dampens Dampening is harmful to the general welfare. the However, taxing anything discourages it somewhat. A cautious approach is to keep tax rates low.
Regional Variation

If a government taxes an activity, residents may go elsewhere for that Also, individuals or businesses may consider tax policies when choosing where to locate.(38)Governments can reduce this effect by considering the tax policies of competitor governments. For example, a sales tax can be held to an amount not much more than sales taxes in nearby locations. However, when governments compete, they should consider relative costs and benefits. For example, tax deals may attract new businesses, but if the taxes are set too low, the businesses may become a net economic liability.
Regulatory Effect

I
I

Some propose that society should tax what it wants to discourage.(39) the taxes succeed in discouraging the behavior, If the result is good. If the behavior is not discouraged, at least matters are no worse. Regulatory taxes can control undesirable

CRITERIA FOR EVALUATING REVENUE OPTIONS

1515

Downloaded by [Yarmouk University] at 21:53 20 February 2012

consumption, production or distribution, or business conduct.(40) Where such taxes regulate questionable personal conduct, they are called "sin taxes" or sumptuary taxes. Candidates for regulatory taxation include economic externalities, consumption, extraction of non-renewable resources, and undesirable behavior. Similar to regulatory taxes are taxes on illegal conduct, such as manufacture and distribution of illegal drugs. By requiring tax stamps for such goods, governments can reduce the burden of prosecution. While it may be difficult to demonstrate intent to distribute drugs, the absence of tax stamps more easily demonstrates tax evasion.(41) However, in 1996 a court in Arizona found that such a tax stamp law had the effect of legalizing the possession of drugs, so this strategy should be used with caution.

Compatibility with Public Policy

Decision makers should consider the policy effects of each revenue measure. If, for example, preserving the environment is a strategic goal, it would be ineffective to increase taxes on nonpolluting modes of transportation.'") Examine each new revenue measure for policy implications before enacting it and periodically review long-standing revenue measures for compatibility with current policies. When revenue measures conflict with important policies, alternative sources of revenue should be sought.
CONSENT

"It is fit every one who enjoys his share of [government] protection, should pay out of his estate his proportion for the maintenance of it. But still it must be with his own consent.. .."(43) From the thirteenth through eighteenth centuries, consent dominated thought about taxes in documents such as the Magna

1516

WILLIAMS AND WOOLDRIDGE

Charta and the Declaration of Independence. In the nineteenth century, Mill held tax payment to be a qualification for suffrage,(4") a view echoed more recently by B~chanan.(~~) However, Rawls(* substitutes hypothetical consent for the real thing. Recent judicial action suggests that consent is no longer a priority(47) discussion and of voter choices even hints at contempt for consent.(48)
Downloaded by [Yarmouk University] at 21:53 20 February 2012

Downs argues that when citizens compare relative utility as tax payer and consumer of public services, they undervalue the government, and so prefer inadequate taxes.(49) So, obtaining consent for adequate taxation is difficult.(50) The current tax reduction bidding war among U. S. politicians supports these views. The criteria we find that relate to consent include visibility, participation, perceptions, retention of autonomy, and legality. Visibility Taxing directly makes taxes visible and encourages public parti~ipation.'~') Deliberately disguising government costs, called fiscal illusion, can include the use of value-added taxes, grants, or levying many taxes with individually low rates. Fiscal illusion implies elitist decision making, which is incompatible with democracy. Still, increased visibility of taxes can impede funding. Governments need not sit idly by: they can show citizens why funds are needed and that they operate responsibly. . Visibility is also important with favorable tax treatment. Tax expenditures can be used to hide favorable treatment. Governments forgo a large part of their tax base through this device. Evidence suggests that higher visibility tends to curtail such favoritism.(53) Participation Participation may help obtain consent for revenue decisions.

CRITERIA FOR EVALUATING REVENUE OPTIONS

1517

It can be increased through processes such as referenda or hearings, and through devices such as earmarking, user fees and tax checkoffs. Defects of these devices include a lack of flexibility, a potential mismatch between revenue and costs, an inability to fund basic functions through some of these approaches, and a transfer of power to beneficiaries of favored expenditures.
Downloaded by [Yarmouk University] at 21:53 20 February 2012

Participation in the formal decision-making process depends on access. When interest groups have more access than others, they shift taxes away from themselves by obtaining exclusions, deductions and other tax expenditures.'") The result is an erosion of the tax base. Over time, tax rates must be raised or more forms of revenue measures created, and so those not represented by interest groups come to bear a heavier share of taxes.(55)
Perceptions

Citizen views about many of the criteria discussed here affect consent for revenue measures. Citizens may view certain revenue devices as unfair, or a fair revenue measure may exceed perceived capacity. Taxes are more acceptable when they are temporary or affect the politically weak; when changes or increases are gradual, predictable, and unobtrusive; and when governments are seen to be accountable.(%) However, when the need is not truly temporary, making a tax temporary may increase public sensitivity by keeping it on the public agenda.
Retention of Autonomy

Local decision makers can lose autonomy over decision making.(s7)When higher governments tax away funds and return them through grants, local decision makers are induced to pursue the goals of distant decision makers.(58) Induced decisions may

1518

WILLIAMS AND WOOLDRIDGE

reduce local constituents' influence on local matters. The effect can be loss of acceptability. Revenue measures should be crafted to be as narrow as possible, raising funds from only those regions involved in the particular activities. Legality
Downloaded by [Yarmouk University] at 21:53 20 February 2012

The law gives the federal government broad taxing ability. The constitution allows Congress to, "lay and collect taxes, duties, imposts and excises." Congress may not tax the export of states or take private property for public use without compensation. Revenue bills must originate in the House of Representatives. The Constitution prohibits states from taxing national trade, or interfering with interstate commerce. Access to revenue measures depends on state constitutional and statutory restrictions. Based on Dillon's rule and many state constitutions, local governments are granted taxing authority from states. Many states restrict local government access to such basic sources as income tax and user fees. State and local taxing authority eroded in the 1980s through the spread of two types of tax and expenditure limitations (TELs): restrictions on tax rates, and required disclosure of specific information with passage of tax statutes.(59) popularity of these The measures suggests an absence of consent for government revenue measures. FAIRNESS "The apportionment of taxes on the various descriptions of property is an act which seems to require the most exact impartiality; yet there is, perhaps, no legislative act in which greater opportunity and temptation are given to a predominant party to trample on the rules of justice. "(')

CRITERIA FOR EVALUATING REVENUE OPTIONS

1519

Government revenue systems clearly must be fair: in 1996 an online literature search found 10,000 matches on the words "tax fairness." Yet the discussion we find is not as well developed as with other criteria. The fairness criteria we include are incidence, benefit, ability to pay, categorical fairness, fair use, fair game, fair treatment and administrative fairness.
Downloaded by [Yarmouk University] at 21:53 20 February 2012

Incidence
Public costs may be paid by someone other than the nominal payer. The nominal payer may shift tax incidence (burden) through increased prices for his services or reduced payment for the services he buys from others.(61) Payers can shift their incidence when their suppliers or customers are more dependent on them than vice versa. Shifting incidence is, itself, neutral to fairness; however, issues of fairness concern the economic payer, not the nominal payer.

Benefit
The benefit principle calls for citizens to pay for government according to benefits received.@j2) Otherwise, someone pays for someone else's services. Two ways to include benefit in a revenue system are: (1) charging user fees and allowing citizens to decide what benefit they are willing to buy; and (2) spending funds in the same sector they are collected in to assure that paying for a service is related to receiving it. These approaches are not available when benefits are widespread, as with national defense, or when policies are intentionally redistributional. Some argue that well-being is the primary benefit received from government. Those who have more well-being receive a greater benefit and should pay more government costs. However, it is difficult to account for the cost of producing various increments of well-being.

1520

WILLIAMS AND WOOLDRIDGE

Ability to Pay
The ability-to-pay principle, based on the idea that government benefits everyone roughly the same, calls for citizens to make "equal sacrifices" for the cost of government.(63)Equal sacrifice implies horizontal equity (equally able people paying about the same for government) and vertical equity (differently situated people paying in relation to their various abilities). Ability is measured in income or wealth, or some combination of the two. Revenue measures can be classified as: (1) regressive measures, which demand a greater proportion of income or wealth from those with the least ability, such as a head tax; (2) proportional measures, which are proportional to income or wealth, such as a flat tax; and (3) progressive measures, which require a greater proportion from those with a higher ability to pay, such as increasing marginal rates in progressive income tax. Over the past century, there has been a loose consensus that progressive taxation is required to satisfy the equal sacrifice criterion, and there is some evidence that it does.(64) consensus This is under attack. A political attack holds that attributes of the tax payer (such as his sacrifice) are irrelevant to taxation; instead, it is urged that taxes focus on gross economic capa~ity.'~' Buchanan argues from another view that all non-uniform taxes lead to unstable tax policies. Uniform taxes are indifferent to ability to pay, so equal sacrifice is irrelevant. If redistributional policies are required, they should be handled outside the tax system.(w Even the egalitarian Rawls provides only tepid support for progressive taxes. (67)

Downloaded by [Yarmouk University] at 21:53 20 February 2012

Categorical Fairness
By categorical fairness we mean balanced treatment for members of various categories. Categories need not be well-

CRITERIA FOR EVALUATING REVENUE OPTIONS

1521

Downloaded by [Yarmouk University] at 21:53 20 February 2012

defined; they can be aggregated by means of members' mutual use of a taxable item, such as motorized bicycles.(68) primary issue The involved with categorical fairness is the protection of the politically weak. Politically weak individuals may be non-residents,@)future generations,('O) social outcasts, or other people who have little ability to gain a political voice. They may be weak in general, such as future generations, or weak in relation to some taxing authority, such as commuters. Clever politicians shift costs to the politically weak because they can appear to provide benefits at no cost and because oversight of their activities is reduced.(71) Fairness is usually found in the benefit principle. Fair Use Governments exercise coercive power to raise funds only if they use the funds fairly. Three parts of fair use are purpose, value and absence of harm. (1) Public money should not be used for private purposes. It is difficult to attain compliance with this principle, particularly when the private purposes can be disguised as public purposes. (2) Fair use of funds collected by governments requires that government must be worth what it costs. (3) A minimal benefit principle is the principle of no harm--it is not fair to take use someone's own resources to harm him or her.(72) Fair Game Certain revenue bases are deemed privileged and not accessible to taxation. For example, resources that are already burdened with the need to support basic survival are not fair game for taxes.(73) Other candidates for privileged non-taxable status include personal attributes, charitable donations, receipt of health care, human labor and food.(74)In the United States, a poll tax was associated with

1522

WILLIAMS AND WOOLDRIDGE

electoral discrimination before the mid-1960~.(~~)contrast, In possible tax bases that have been proposed to be particularly apt include those items listed in the section on regulatory effect as well as land rent and maleness.("j) Another possible fair game criterion is that individuals should be held harmless for decisions made based on existing tax law.(77) Such a criterion has the effect of guaranteeing continued tax favors for those who have gained them through excessive access to power. The criterion of non-disruption or special cases of hardship may still support hold-harmless provisions at times, but the presumption should be against such provisions. There are two forms of tax overlap that offend the fair game criterion. With the first, overlapping jurisdictions tax the same base, and in combination the tax is burdensome. The payer cannot hold particular officials responsible, since it is the combination of taxes that is burdensome. With the second, non-overlapping jurisdictions tax the same person, as with commuter income taxes. If either locality is indifferent to the fact that the other locality is taxing him, he may be excessively taxed. Fair Treatment Revenue measures should reflect fair and honest treatment between participants in revenue relationships. In part we have discussed this idea in the sections on visibility and fair use. Fair treatment can be complex. For example, in the late 1980s federal government policy forced rapid growth in state Medicaid expenditures. In the early 1990s the states engaged in a complex funding scheme using "taxes" that were fully refunded to payers to force the federal government to contribute more than its intended share of Medicaid costs.(78)Both sides ignored the other's clear intentions and interests. Such unfair treatment promotes distrust,

Downloaded by [Yarmouk University] at 21:53 20 February 2012

CRITERIA FOR EVALUATING REVENUE OPTIONS

1523

dishonesty and retaliation. For example, when tax payers suspect that complex filing laws disguise the fact that others are receiving favorable treatment without good reason, they may become noncompliant. Administrative Fairness
Downloaded by [Yarmouk University] at 21:53 20 February 2012

Administrative fairness depends on certainty and enforceability.(79) Certainty is produced by clearly defined requirements that the tax payer can use to predict his liability.(80) Confusing tax provisions contribute to resentment, avoidance and evasion. When alternative interpretations of tax rules are available, taxpayers may choose the one with the lower tax, which leads to loss of revenue or to a costly effort to discover and collect taxes. Revenue systems should not impose taxes that cannot be enforced, such as those that require a heroic effort on the part of the revenue agency or the payer to calculate or collect. Where tax payers can comply with the law, three factors that improve compliance are auditing, reduction of compliance costs, and appeals to tax payer conscience.('l)

WHEN CRITERIA CONFLICT

These criteria are likely to lead to conflicting decisions. For example, income tax amnesty is a popular money maker for decision but it suggests unfairness between tax payers. How are these conflicts to be resolved? Van Der H~ek''~) provides a good example of an effective approach. He begins with actual revenue proposals and looks for criteria that may either support or detract from the use of that source. Each proposal is examined for its positive and negative attributes. Once the main strengths and weaknesses are identified, they are weighed against each other and

1524

WILLIAMS AND WOOLDRIDGE

an option is selected. This procedure is not an algorithm for the perfect revenue measure. Reasonable people will disagree. Another approach to using criteria in revenue planning is described by Weistroffer, Wooldridge and Si~~gh.(*~) worked They with a medium-size mid-Atlantic city to identify an optimal revenue program. The nine members of the city council ranked seven revenue criteria--administrative feasibility, social and political acceptability, horizontal equity, vertical equity, stability, regulatory effect, and compatibility with the strategic plan--with the assistance of Expert Choice decision-support software. The results of this process were integrated with the results of a Delphi approach, where tax experts compared four alternative revenue plans with respect to the specific criteria. Are these criteria an axiomatic system that must lead to correct revenue decisions? No. If they are treated as axioms, they will lead to a great many conflicting decisions. So, are they just so many meaningless proverbs? Also, no. If they are treated as heuristics drawing attention to the matters worthy of attention, they can help the decision maker make better decisions.
ACKNOWLEDGMENTS

Downloaded by [Yarmouk University] at 21:53 20 February 2012

We would like to thank the editor and reviewers for their helpful suggestions.
REFERENCES

1.

Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations, [online] http:/www .vt.edu (1W6), 1776.

CRITERIA FOR EVALUATING REVENUE OPTIONS

1525

Aronson, J. Richard. Public Finance, McGraw-Hill Book Company, New York, 1985. Bahl, Roy and Montrone, W. Forecasting Municipal Revenues and Expenditures: A Primer and Handbook, Coalition of Northeast Municipalities, Boston, 1980.
Downloaded by [Yarmouk University] at 21:53 20 February 2012

Eckstein, Otto. Public Finance, Englewood Cliffs, New Jersey, 1973.

Prentice-Hall,

Mikesell, John L . Fiscal Administration Analysis and Applications for the Public Sector, 4th ed., Wadsworth Publishing Company, Belmont, California, 1995. Moak, Lenox L. and Hillhouse, Albert M. Local Government Finance, Municipal Finance Officers Association, Chicago, 1975. Pechman, Joseph. Federal Tax Policy, The Brookings Institution, Washington, D. C., 1987. Pierce, Lawrence W. and Rust, Kenneth L. "Government Enterprises," in John E. Peterson and Dennis Strachota (eds.), Local Government Finance: Concepts and Practices, Government Finance Officers Association, Chicago, 1991, pp. 393-416. Reed, B. J. and Swain, John W. Public Finance Administration, Prentice-Hall, Englewood Cliffs, New Jersey, 1990. Rickards, Robert C. and Maeda, Takeshi. "Taxing and Spending in Japan and Texas: Whose Cities Are Better Off?" Public Budgeting and Finance 12 (1992): 66-85.

WILLIAMS AND WOOLDRIDGE

Rostvold, Gerhard. Financing California Government, Dickenson Publishing Co., Belmont , California, 1967. Schultz, William J. and Harriss, C. Lowell. American Public Finance, Prentice-Hall, Englewood Cliffs, New Jersey, 1965.
Downloaded by [Yarmouk University] at 21:53 20 February 2012

Joint Economic Committee. "Principles of a Model Tax System, " [online]http://www .senat.gov/-jedfltxprin. html, (8196). Simon, Herbert A. "The Proverbs of Public Administration," in Jay M. Shafritz and Albert C. Hyde (eds.) , Classics of Public Administration, Brooks/Cole Publishing Company, Pacific Grove, California, 1991, pp. 150-170. Simonde de Sismondi, J. C. L. Political Economy, [online] http://socserv2.socsci. mcmaster .cat (9/96), 1815. Schultz and Harriss, op. cit., p. 142. Samuelson, Paul A. and Nordhaus, William D. Economics, 14th ed., McGraw-Hill, New York, 1995, p. 331. Mikesell, John L. "State Sales Tax Policy in a Changing Economy, " Public Budgeting & Finance 12 (1992): 8391; Musgrave, Richard and Musgrave, Peggy B. Public Finance in Theory and Practice, McGraw-Hill, New York, 1976, pp. 14-15. Kravchuk, Robert S. "The 'New Connecticut': Lowell Weicker and the Process of Administrative Reform," Public Administration Review 53 (1993): 329-338.

CRITERIA FOR EVALUATING REVENUE OPTIONS

1527

Lemov, Penelope. "The Property Tax Blues, " Governing 8 (August 1995): 28-32. Drennan, Matthew P. "The Present and Future Fiscal Problems of the Two New Yorks: What Happened This Time, " Public Budgeting & Finance 14 (1994): 79- 102.
Downloaded by [Yarmouk University] at 21:53 20 February 2012

Sharpe, Elaine B. and Elkins, David R. "The Impact of Fiscal Limitation: A Tale of Seven Cities," Public Administration Review 47 (1987): 385-392; Lemov, Penelope. "Is There Anything Left to Tax?" Governing 6 (August 1993): 26-30. Gould, Russell. "Surviving a Revenue Collapse: Shortfall and Recovery in California," Public Budgeting & Finance 10 (1990) : 62-71. Brecher, Charles, Horton, Raymond D. and Mead, Dean M. "Budget Balancing in Difficult Times: The Case of the Two New Yorks," Public Budgeting & Finance (1994): 65-78. Peterson, John E. "News From the Hudson: Creative Financing Goes Berserk," Governing 6 (December 1992): 62. Barnett-Moore, Jerri and Overly, R. Keith. "A Utility Financial Policy: Guiding Forecasts of Long-Term Capital Financing Needs, " Government Finance Review 12 (June 1996): 7-18. Jorion , Philippe. Big Bets Gone Bad, Derivatives and Bankruptcy in Orange County, Academic Press, San Diego, 1995.

WILLIAMS AND WOOLDRIDGE

Downloaded by [Yarmouk University] at 21:53 20 February 2012

Barlow, Robin and Snyder, Wayne. "The Tax That Failed: The VAT in Niger," Public Budgeting & Finance 14 (1994): 77-89; Peterson, John E. "Superfund: The Super Headache for Local Governments," Governing 6 (March 1993): 57; Government Accounting Office, Tax Policy and Administration: California Taxes on Multinational Corporations Related to Federal Issues, Government Accounting Office, Washington, D. C., July 1995. Van Der Hoek, Peter M. "Local Taxation in the Netherlands, " Public Budgeting & Finance 11 (199 1) : 66-79. Schultz and Harriss, op. cit., pp. 198ff. Machiavelli, Niccolo. The Prince, translated by W. K. Marriott, [online] vt .edu (8/96), 1515. Cooley , Thomas F. and Hansen, Gary D. "Tax Distortions in the Neoclassical Monetary Economy," Journal of Economic Theory 58 (1992) : 290-3 16; Congressional Budget Office, op. cit., 1992; Suyderhoud, Jack P. and Seo, K. K. "Tax Design and the Meddling Factor: Lessons from Hawaii's Liquor Tax, " Public Budgeting & Finance 12 (1992): 35-46. Harriss, C. Lowell. "Reducing Tax Obstacles to Economic Progress: An Address," The American Journal of Economics and Sociology 53 (1994): 376-383. Congressional Budget Office, op. cit., 1992. McCaffrey, Edward J. "The Political Liberal Case Against the Estate Tax, " Philosophy & Public Aflairs 23 (1994) : 281-312.

CRITERIA FOR EVALUATING REVENUE OPTIONS

1529

Cooley and Hansen, op. cit., pp. 290-316. Lovely, Mary E. "Crossing the Border: Does Commodity Tax Evasion Reduce Welfare and Can Enforcement Improve It?" Canadian Journal of Economics 27 (February 1994): 157-174.
Downloaded by [Yarmouk University] at 21:53 20 February 2012

Rivlin, Alice. "A New Vision of American Federalism," Public Administration Review 52 (1992) : 3 15-320. Summers, L. H. "The Case for Corrective Taxation," National Tax Journal 44 (September 1991): 289-292. Schultz and Harriss, op. cit., pp. 173-176. Sylvester, Kathleen. "Tax Stamps a New Way to Lick Drug Pushers, " Governing 1 (September 1988): 16. Van Der Hoek, op. cit., pp. 66-79. Locke, John. Second Treatise of Government, ftp://wiretap.spies.com/Libra1y/Classic/locke2nd. txt 1690. Mill, John S. Representative Government, (online]http :// www.vt.edu (8/96), 1861. Buchanan, James M. "The Political Efficiency of General Taxation, " National Tax Journal 46 (1993) : 40 1-411. Rawls, John. A Theory of Justice, The Belknap Press of Harvard University Press, Cambridge, Massachusetts, 1971.

O'Leary,Rosemary and Wise, Charles. "Public Mangers, Judges, and Legislators, Redefining the 'New

WILLIAMS AND WOOLDRIDGE

Partnership, "' Public Administration Review 5 1 ( 1991): 3 16-327. Mikesell, John L. and Zorn, C. Kurt. "State Lotteries as Fiscal Savior or Fiscal Fraud: A Look at the Evidence," Public Administration Review 46 (1986): 3 1-32.
Downloaded by [Yarmouk University] at 21:53 20 February 2012

Downs, Anthony. "Why the Government Budget is Too Small in a Democracy, " in A. Hyde (ed.), Government Budgeting: Theory, Process, Politics, 2nd ed., Wadsworth, Belmont, California, 1992, pp. 217-230. Rubin, Irene S. The Politics of Public Budgeting, 3rd ed., Chatham House Publishers, Chatham, New Jersey, 1997, pp. 29-73. Reed and Swain, op. cit., p. 87. Dollery, Brian E. and Worthington, Andrew C. "The Impact of Fiscal Illusion on Housing Values: An Australian Test of the Debt Illusion Hypothesis," Public Budgeting & Finance 15 (1995): 63-73. Rubin, op. cit., pp. 29-39, 59. Suyderhoud and Seo, op. cit., pp. 35-46. Posner, Paul L. "Stampeding Toward Major Policy Change, " Public Administration Review 54 (1994): 2 13215. Rubin, op. cit., pp. 38-39. Mullins, Daniel R. and Joyce, Phillip G . "Tax and Expenditure Limitations and State and Local Fiscal Structure: An Empirical Assessment, " Public Budgeting & Finance 16 (1996): 75-101.

CRITERIA FOR EVALUATING REVENUE OPTIONS

1531

Evans, Diana. "Reconciling Pork-Barrel Politics and National Transportation Policy: Highway Demonstration Projects," in Robert S. Gilmour and Alexis A. Halley, (eds.), Who Makes Public Policy? The Struggle For Control Between Congress and the Executive, Chatham House Publishers, Inc., Chatham, New Jersey, 1994, pp. 42-6 1.
Downloaded by [Yarmouk University] at 21:53 20 February 2012

Advisory Commission on Intergovernmental Relations. Significant Features of Fiscal Federalism, Vol. 1, U.S . Government Printing Office, Washington, D. C., 1992; Advisory Commission on Intergovernmental Relations. Significant Features of Fiscal Federalism, U .S. Government Printing Office, Washington, D .C ., 1979-80. Madison, James. Federalist No. 10, [online] gopher: //wiretap. spies.com/ (1996). Pechman, Joseph. The Rich, The Poor, and the Taxes They Pay, Wheatsheaf Books, Washington, D. C., 1986; Phares, Donald. Who Pays State and Local Taxes? Oelgeschlager, Gunn and Hain, Cambridge, Massachusetts, 1980. Samuelson and Nordhaus, op. cit., pp. 322-323. Mill, John Stuart. Principles of Political Economy, [online] http://socserv2. socsci.mcmaster .ca/(8/96), 1848. Young , H . Peyton . "Progressive Taxation and Equal Sacrifice," The American Economic Review 80 (1990): 253-256. Joint Economic Committee. "JEC State and Local Taxation and Economic Growth: What Makes a Good Tax?" [online] www. senate.gov (8196).

WILLIAMS AND WOOLDRIDGE

Buchanan, op. cit. , pp. 40 1-411. Rawls, op. cit., pp. 278-279. Van Der Hoek, op. cit. , pp. 66-79. Mikesell, op. cit., 83-91
Downloaded by [Yarmouk University] at 21:53 20 February 2012

Generational Accounting: Knowing Who Pays, and When, for What We Spend,
The Free Press, New York, 1993. Bird, Richard M. "Threading the Fiscal Labyrinth: Some Issues in Fiscal Decentralization," National Tax Journal 46 (1993): 207-227; Rubin, op. cit., p. 39. Cullity , Garrett. "Moral Free Riding, " Philosophy & Public Affairs 24 (1 995): 3-34. Mill, op. cit., 1848, book 5, chapter 2. Lemov, Penelope. "Curing the 'Sick Tax, ' " Governing 9 (November 1995): 59-6 1; Harriss, op. cit. , 1994, pp. 376383; Pogge, Thomas W. "An Egalitarian Law of People, " Philosophy & Public Aflairs 23 (1994): 195-224. Scher, Richard K. Politics in the New South: Republicanism, Race and Leadership in the Twentieth Century, Paragon House, New York, 1992, p. 300. Stephenson, June. Men Are Not Cost-Effective: Male Cn'me in America, Diemer, Smith Pub. Co., Napa, California, 1991; Harriss, op. cit., pp. 376-383. Joint Economic Committee. "Principles of a Model Tax System, " [online] http://www .senat.gov/' jed fltxprin html, 8/96; Congressional Budget Office, op. cit., 1992.

Kotlikoff, Laurence J .

CRITERIA FOR EVALUATING REVENUE OPTIONS

1533

Lemov, op. cit., pp. 59-61. Rice, Eric M. "Public Administration in Post-Socialist Eastern Europe," Public Administration Review 52 (1992): 116-124; O'Leary , Frank. "Automated Taxpayer Service: Simple and Convenient," Government Finance Review 6 (April 1990): 11- 15.
Downloaded by [Yarmouk University] at 21:53 20 February 2012

Ecker-Racz, Laszlo L. The Politics and Economics of State-Local Finance, Prentice-Hall, Englewood Cliffs, New Jersey, 1970, p. 41. Snavely, Keith. "Innovations in State Tax Administration, " Public Administration Review 48 (1988) : 903-910. Alm, J. and Beck, W. "Tax Amnesty and Compliance in the Long Run: A Time Series Analysis," National Tax Journal 46 (1993): 13-22. Van Der Hoek, op. cit.. pp. 66-79. Weistroffer, H. Roland, Wooldridge, Blue, and Singh, Rahul. "Local Tax Planning with AHP and Delphi," Abstracts of the Twelfth International Conference on Multiple Criteria Decision Making, Hagen, Germany, June 19-23, 1995.