DO TAX EXPENDITURES CREATE FRAMING EFFECTS? VOLUNTEER FIREFIGHTERS, PROPERTY TAX EXEMPTIONS, AND THE PARADOX OF TAX EXPENDITURE ANALYSIS

I. INTRODUCTION

During the summer of 2003, the Michigan legislature decreed that the state's tax expenditure budget shall henceforth be denoted as the governor's report on "tax credits, deductions, and exemptions."1 This name change was not an inadvertent or technical adjustment but reflected a concerted effort by Michigan opponents of tax expenditure analysis to jettison what they believe is a misleading label.2

Of course, in political discourse, labels matter - as politicians have understood from time immemorial. "No taxation without representation" was a better slogan than "We want to be protected by the British Empire but don't want to pay for it." In recent years, however, scholars working under the rubric of behavioral economics have taken the age-old insight that labels matter and have given it a new salience. These scholars have demonstrated that "framing effects" may occur when individuals - often reasonably sophisticated and otherwise rational individuals - make and frequently maintain substantively inconsistent choices depending upon the manner in which the choices are framed.