Should the Federal Government Help States and Local Governments Pay for Police Misconduct Through Tax-Exempt Bonds?

Document Type

Article

Journal Title

Virginia Tax Review

Volume

42

First Page

287

Publication Date

Winter 2023

Abstract

A national issue of utmost importance is police misconduct, especially as it affects people of color. Tragic events involving police misconduct have led to proposals for police reform - which have run the gamut from abolishing the police, defunding the police, replacing the police for certain functions, and improved police training and hiring practices.

Following instances of alleged police misconduct, survivors and victims' families typically bring claims for damages, which may result in judgments or settlements paid by the states and local governments that employ the police officers involved in the alleged misconduct. Often these settlements and judgments are funded by tax-exempt bonds, which results in an effective tax subsidy to the jurisdictions issuing the bonds. Thus, the funding of police misconduct settlements and judgments via tax-exempt bonds raises the issue of whether the federal government should be subsidizing the payment of these settlements and judgments.

This article analyzes this issue and considers a possible measure for restricting the use of tax-exempt bonds to fund police misconduct settlements and judgments. Under this measure, states and local governments would be permitted to use tax-exempt bonds to finance police misconduct payments, but only if the state or local government issuing the bond complies with certain policies for law enforcement training, hiring, and the like, which are designed to reduce police misconduct. This restriction on using tax-exempt bonds would incentivize state and local governments to adopt certain federal policies on policing and ensure that the federal government is subsidizing activities that achieve a public benefit in the view of the federal government, which is consistent with the policy underlying the tax exemption for state and local bonds.

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