April 1, 2015

DON'T SPEND MORE, SPEND SMARTER:

The False Hope of a Limited Government, Built on Tax Breaks (Eduardo Porter, 3/31/15, NY Times)

[T]hough the health insurance tax break has since grown into the nation's costliest tax expenditure, it is only one of many. Tax deductions for mortgage interest and charitable contributions were born with the income tax code in 1913. The government later added breaks for retirement savings. More recently, the earned-income tax credit for the working poor was created in 1975 and broadly expanded by President Bill Clinton with his first budget. In response to the rising cost of higher education, Washington provided a deduction for college tuition.. [...]

Jacob Funk Kirkegaard, a senior fellow at the Peterson Institute for International Economics, notes how different the American government looks when one includes all it spends through the tax code.

By conventional measures, public social spending in the United States -- defined as what the government spends directly to help people get through hard times like illness, unemployment or old age -- ranks significantly below the average among the other 33 industrialized countries of the Organization for Economic Cooperation and Development.

In 2011, social spending from all levels of government amounted to 19 percent of gross domestic product, about three percentage points less than in Norway and 11 points less than in Denmark.

But including both taxes on government benefits, which tend to be higher in other countries, and the cost of tax subsidies like the deduction for company-provided health insurance, American public spending on social insurance rises to almost 21 percent of G.D.P.

That is above the O.E.C.D. average, ahead of Norway and no longer that far behind Denmark.

And this doesn't even count government spending on education above the age of 6, which the O.E.C.D. considers an investment rather than social insurance, nor the costly mortgage tax deduction, which provides the vast bulk of its benefit to the most affluent households.

Welfare reform never starts at home.


Posted by at April 1, 2015 1:08 PM
  

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