Tax policy and Chaos: War, disaster, and the role of the tax system

Abstract

The importance of the tax system during times of crisis is in some ways obvious. Crises such as war and disaster demand greater public expenditure, which requires greater public revenue, which generally requires an increased burden of taxation of one form or another. This chapter takes the fundamental revenue-raising function of the tax system as a given and seeks to offer some observations regarding the proper role of the tax system—beyond raising revenue—in times of disaster. Using United States tax policy documents prepared in contemplation of nuclear war and tax measures implemented in response to Hurricane Katrina, this chapter makes three general points about how fundamental tax policy concerns and disaster management affect one another. First, tax policy borne during the emotion and exigency of war and disaster tends to become embedded in public policy. Second, crises can expose an unexpected capacity in the tax system to address systemic economic issues. Finally, using the tax system to target relief is difficult in practice.