Liberal, Irreverent

Monday, March 21, 2011

Cut Spending in the Tax Code

Wasteful Spending in the Tax Expenditure Budget Is Fertile Ground for Deficit Reduction

By Seth HanlonMichael Ettlinger

Our nation needs jobs, a strong and competitive economy, and deficit reduction. The way to win that trifecta is not the House of Representatives’s continuing resolution for the remaining seven months of fiscal year 2011—a bill panned by a wide range of economists from across the political spectrum as a threat to economic recovery and a job destroyer. And the way to get deficit reduction is not as the House-passed bill does, to initiate immediate cuts concentrated in one narrow area of the budget that funds the most critical investments for long-term economic growth.

Instead, the focus should be on the waste found in the largest area of spending, an area of the budget larger than Social Security, Medicare, Medicaid, or national defense: the more than $1 trillion of tax-code spending hidden in the federal tax code. Dollars spent through the tax code in the form of tax breaks, called tax expenditures, are widely recognized to be the functional equivalent of direct government spending.

With the debate raging in Washington over spending cuts, tax-code spending should be on the table. In this report we identify individual tax-code spending cuts that could total $64 billion in FY 2012 and $502 billion over five fiscal years. If enacted, these cuts would be far less harmful than the $60 billion of short-term direct spending cuts that have passed the House of Representatives.

Read and download this report here.

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