Spending and Tax Entitlements

Posted: 6 Apr 2007


Concerns about the affordability of an aging society have moved entitlement spending - especially for Social Security, Medicare, and Medicaid - to the forefront of domestic policy debates. Another part of our social welfare system - tax entitlements, like the exclusion for employer-provided health insurance or the deduction for mortgage interest payments - represent an entirely distinct and hidden part of our social welfare system.

Spending entitlements totaled more than $1.4 trillion in 2006 (not counting offsetting receipts), compared with $850 billion in tax entitlements. Both sets of programs operate somewhat automatically without annual appropriations review, both are very large, and both have the same impact on federal budget deficits. But spending entitlements have received far more attention in the debate over our current and future budget problems.

The debate over spending entitlements has led to the impression that they benefit mainly the old and that they are relatively poorly targeted, benefiting the middle class and more affluent as well as the poor and low-income. A more comprehensive look at entitlements to include tax benefits shows that spending and tax entitlements are both very large (although spending entitlements are larger) and that overall entitlements are closely divided between those who are age 65 or older and those under 65. Even though spending entitlements broadly span the middle class, they are more closely targeted on those in need than tax entitlements.

Suggested Citation

Gist, John R., Spending and Tax Entitlements. Tax Notes, Vol. 115, No. 2, April 9, 2007, Available at SSRN: https://ssrn.com/abstract=978884

John R. Gist (Contact Author)

AARP ( email )

601 E Street NW
Washington, DC 20049
United States

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