The Hidden Entitlements

PART IV
Conclusion


The notion that many of the provisions of the Internal Revenue Code are really hidden spending programs may seem surprising to the uninitiated.But it's a well-known fact to the special interest groups that lobby for the loopholes. Indeed, these interests usually prefer to get their subsidies through the tax laws--not only because the benefits are disguised, but because once enacted, they typically remain in the law as permanent entitlements.

At a time of intense, critical scrutiny on direct government programs such as aid to the poor and the elderly, it's especially important to focus on the hundreds of billions of dollars in "hidden entitlements" buried in the tax code. Far too many of these tax subsidies amount to welfare for corporations and the rich. They often involve the government in what it usually does not do well--trying to make decisions for businesses, investors and consumers--and as a result, they harmfully distort private economic choices. Their huge cost adds to budget deficits and crowds out funds for what the government ought to be doing better--building the roads, promoting education, stopping crime, protecting the environment and so forth. And they make our tax laws much too complex.

In short, while not all "tax expenditures" are evil, many of them undermine tax fairness, impede economic growth and divert scarce tax dollars away from better uses. If we hope to "reinvent government" to make it more effective and less burdensome--in short, a better deal for ordinary American families--then scaling back wasteful and pernicious tax loopholes should be at the top of the agenda.27


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