Paying for Welfare: The View from Europe (original) (raw)

Fiscal Welfare and Welfare State Reform: A Research Agenda

2016

Since the 1990s, welfare state reform has been at the core of much of the welfare state research. From an analysis of reform pressures, to an understanding of welfare state resilience, to a focus on reform trajectories, the literature has highlighted the role of politics, of institutions and of ideas in understanding processes and trajectories of reform. This paper aims to contribute to the literature on welfare state reform through a different angle, by analysing reform processes through the development of specific policy instruments, namely tax expenditures for social purposes (hereafter called social tax expenditures, or STEs), which has remained a blind spot in much of the welfare state literature. Already in 1958, Richard Titmuss had highlighted what he termed the „social division of welfare‟, distinguishing between three sources of welfare: social, occupational and fiscal welfare. He noted that most scholarship on the welfare state restricted itself to the world of social welfare, that is the direct public provision of welfare, failing to note the growing scale and distributive tendencies of occupational and fiscal systems – and the ways in which they often ran counter to the distributive directions of the social welfare system. While US scholars have highlighted the importance of tax expenditures in the American welfare state, in Europe STEs still lie in a largely uncharted territory, despite the growing acknowledgement of their significant use, notably through OECD research conducted since the late 1990s. This paper seeks to test the hypothesis that since the 1990s, in the European context, STEs have constituted an important yet understudied part of welfare state reforms. We show through a survey of the literature of the past 20 years on welfare state reforms in Europe that while tax expenditures are sometimes mentioned in passing in the description of welfare reforms, they are very seldom analysed as an important element in the reform process itself. Yet we argue that, due to the specificities of this instrument, the development of tax expenditures for social purposes can have important consequences on the welfare state.