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Tuesday, April 19, 2011

Tax code expenditures

On April 15th I complained that Obama is apparently among those who think of that part of your income that you keep after taxation as "government spending".

It was based on his suggestion that we could reduce the deficit by "cutting expenditures in the tax code."

I thought he was thinking like those in the first paragraph. He may think that way, but that remark is not evidence of that because it appears that there is a genuine concept called a "tax code expenditure."

So here is what I think that I have learned since then.
The government supports certain activities roads, PBS, etc by direct subsidy. That is clearly an expenditure.

But they also support certain other activities by granting to a corporation or individual a deduction (or direct tax credit) for charitable giving or home mortgages. This also "costs the government money" and is therefore an "expenditure" just as surely as if the government sent a check. If you eliminate those things I mentioned or the farm subsidy program you reduce the deficit.

So it would appear that I was W... WR ... WRO ... . Well, I don't seem to be able to say the word, but you get the idea.
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Posted by Unknown at 6:00 AM
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1 comment:

  1. TomApril 23, 2011 at 8:44 AM

    After reading a number of articles on “tax code expenditures” I have to agree with YA’s comments on this post. O is off the hook and I retract my comment of April 15th.

    I will have to add that this has also been a serendipitous eye opener. There exists a widespread (in government circles) use, acceptance, and mindset of a term for making purchases by not collecting taxes. It only works in a setting where an entity has the power to tax or not to tax.

    I am fascinated by the language and substance here. An action (a tax exemption) that reduces revenue has all of the attributes of (and can properly be called) an expenditure. Almost as mind boggling as quantum mechanics.

    p.s. My recent readings on the topic have revealed that tax code expenditures are not treated the same as actual (write a check) expenditures so, far from being negative, I would now applaud O’s original comment on the subject.

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