Conservative and progressive experts agree: tax expenditures are state spending programs

The majority of economists and policy experts view tax expenditures – the myriad of special exemptions, credits, deductions, preferential rates, and other tax preferences – as taxpayer-funded subsidy programs.  The reason is that tax expenditures and direct state spending on public services, like health care and education, share many common attributes. 

Both direct state spending programs and tax expenditures:

• Impact the state budget;
• Can be targeted to specific groups, industries, or activities; and 
• Impose higher costs on other taxpayers. 

Because of these commonalities, economists and policy experts of all political viewpoints agree that tax expenditures deserve the same level of scrutiny by elected officials as direct spending on public services.  The box below, which is from our latest policy brief, provides quotes from prominent conservative and progressive experts and organizations about tax expenditures. Click on the box to enlarge the image.

While there is bipartisan consensus that tax expenditures are equivalent to direct forms of state spending, policymakers in our state do not routinely consider the costs of tax subsidies during the budget process.  The result is a distorted and incomplete view of state spending that hinders policymakers’ ability to make rational choices about core public priorities -- like educating our children and investing in infrastructure needed for economic recovery.

For more information on tax expenditures and long-term reforms to our state budget process read our latest policy brief, Every Dollar Counts: Why it’s Time for Tax Expenditure Reform.