Tax Expenditures: Good, Bad, or Ugly?

Posted: 20 Oct 2006

See all articles by Thomas L. Hungerford

Thomas L. Hungerford

National Academy of Social Insurance (NASI); Independent


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.

Suggested Citation

Hungerford, Thomas L., Tax Expenditures: Good, Bad, or Ugly?. Tax Notes, Vol. 113, No. 4, October 23, 2006, Available at SSRN:

Thomas L. Hungerford (Contact Author)

National Academy of Social Insurance (NASI) ( email )

1776 Massachusetts Avenue, NW
Suite 615
Washington, DC 20036-1904
United States

Independent ( email )

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