Spending in Disguise

Expenditures in the tax code this year add up to $1 trillion

June 28, 2011

Introduction: This report from the nonpartisan Tax Policy Center emphasizes that many tax expenditures—the various deductions and credits in the tax code—are nothing more than spending in disguise.

An excerpt from the report: The federal government spends much more than it collects in tax revenue each year and will continue to do so even after the economy recovers. The argument over how to close that gap is often dominated — sometimes debilitated — by sharp disagreements about how much should come from spending cuts and how much from tax increases. But that division can be misleading. A great deal of government spending is hidden in the federal tax code in the form of deductions, credits, and other preferences — preferences that seem like they let taxpayers keep their own money, but are actually spending in disguise. … The time has come for serious reform. America needs to fix its broken tax system and find additional revenue to help reduce our persistent budget deficits. The best way to achieve both aims is to take a hatchet to the thicket of spending-like tax preferences. Many preferences should simply be eliminated; those deemed to serve important policy goals should be restructured to be simpler, fairer, and more effective. Lawmakers can then use the resulting revenue to cut tax rates across the board and reduce the deficit.

Read the full report.


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