Opinion ID: 2539248
Heading Depth: 2
Heading Rank: 1

Heading: Is a Tax Credit a Direct Expenditure of Funds Generated Through Taxation?

Text: While this Court has put forth the test for taxpayer standing, it never has interpreted what a direct expenditure of funds generated through taxation constitutes. Dictionary definitions provide guidance. Direct, when used as an adjective, is defined as without any intervening agency or step. WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY UNABRIDGED 640 (1993). An expenditure is [a] sum paid out. BLACK'S LAW DICTIONARY 658 (9th ed.2009). A fund is [a] sum of money or other liquid assets. Id. at 743. Generate is defined as to come into existence. WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY UNABRIDGED at 945. Taxation is the means by which the state obtains the revenue required for its activities. BLACK'S LAW DICTIONARY at 1598. Therefore, a direct expenditure of funds generated through taxation is a sum paid out, without any intervening agency or step, of money or other liquid assets that come into existence through the means by which the state obtains the revenue required for its activities. The tax credits created by the Act do not meet the definition of a direct expenditure of funds generated through taxation, as tax credits are not expenditures. Expenditures typically occur in government when checks are written by the state treasurer based on appropriations or warrants. No such withdrawal of public funds or such expenditure occurs with the granting of a tax credit. While expenditures and tax credits might be compared in that their end result is less money in the state treasury, the similarity is superficial. Said differently, a tax credit expresses the legislature's wish to declare a portion of the pool of taxable assets off-limits to its own power to collect taxes. Properly understood, this does not result in less money in the treasury because the legislature never wished it to be there in the first place. A tax credit is not a drain on the state's coffers; it closes the faucet that money flows through into the state treasury rather than opening the drain. Further, taxpayers never argued that the money at issue was received by the State or that it ever belonged to the public. The legislature, through approving the Act, decided to leave the money in the hands of a particular person or entity. Its passage of the Act constituted an acknowledgment that the State never would have the tax revenue to spend because it was waived by tax credits. Lowering tax liability by such means does not move money out of the public treasury; it leaves it in private hands. A particular person or entity would retain the power to spend the money instead of paying the money over to the government as taxes. Insofar as the purpose of taxpayer standing is to give taxpayers a way to conform government spending to the law, that purpose is not served if the State is spending nothing.