In a seminal essay, Titmuss (1958) coined the concept of the ‘social division of welfare’, distinguishing between social, occupational and fiscal welfare. He noted that most welfare state scholarship restricted itself to the world of social 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. Seventy years on, fiscal welfare largely remains the ‘black box’ of the welfare state. While US scholars have highlighted the importance of tax expenditures in the American welfare state (Howard 1997; Hacker 2002; Prasad 2011), in Europe social tax expenditures remain understudied despite their growing use, and this across all welfare regimes. Indeed, most European countries now support the development of private pensions through tax incentives, and these have also been on the increase in the fields of healthcare, family policy, employment, housing, child and eldercare, and household services.
As the US-based literature has shown, the use of social tax expenditures raises many important issues, whether it be in terms of the democratic political process as these schemes remain largely invisible to mass publics and are less scrutinised than general direct expenditures; in terms of the distributive effects of such policies; or in terms of the governance of social protection, with an increased delegation of responsibilities towards the private sector.
The aim of this paper is to engage with the political economy of fiscal welfare in Europe, by mapping out and analysing the uses and consequences of fiscal welfare across European welfare states, with a particular attention to the policy rationales for the growing recourse to tax instruments and to the ways these tax instruments contribute to the institutional and normative transformation of the welfare state.
