Tax Expenditures: Good, Bad, or Ugly?
Posted: 20 Oct 2006
Tax expenditures are often alternatives to other policy instruments such as grants. Consequently, national social and economic goals are sometimes met through the tax code rather than through direct expenditures. Regardless, Hungerford notes, many experts argue that tax expenditures are often less efficient than direct expenditure programs in promoting these important economic and social goals. At the same time, he explains, still other tax expenditures appear not to meet any social or economic goal. In general, according to Hungerford, tax expenditures tend to reduce the progressivity of the income tax system, and add to the complexity of the tax system from the taxpayer's point of view. Further, he adds, unlike direct expenditures, the benefits of much of the tax expenditures go to taxpayers in the upper part of the income distribution, and they often subsidize an activity for which the taxpayer receives a benefit.
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