November 23, 2014

Many Benefits to Cutting Subsidies in Tax Code

  • The national debt has grown significantly in recent years due to rising annual deficits. A deficit occurs in any year the government spends more...

Scaling back government subsidies in the tax code, as recommended by a number of bipartisan panels, remains a central issue in the debate over federal deficit reduction.

In her latest column for Tax Notes, Concord Coalition Chief Economist Diane Lim Rogers – referring to an old beer commercial -- explains why reducing these subsidies, known as “tax expenditures,” is a “tastes great, less filling” way to reduce the deficit. It would improve tax and spending policies, she says, in ways that should appeal to people across the political spectrum -- without the negatives that might come with other policy choices.

Democrats often oppose cuts in direct spending because they would disproportionately hurt the poor. But Rogers notes that cutting tax expenditures would make the tax system more progressive by reducing subsidies that largely benefit people with higher incomes.

Meanwhile, she argues, Republicans should appreciate that reducing tax expenditures would lead to smaller government in that  people and businesses would worry less about the tax consequences of their actions. Reducing the economic distortions of the tax system would promote efficiency and encourage long-term economic growth.