Washington, D.C. — Today, as the super committee continues to deliberate their next round of budget reductions, the Center for American Progress released six guidelines for fixing the excessive and expensive system of tax breaks, credits, and loopholes, known as tax expenditures.
Every year the federal government spends more than $1 trillion through special provisions of the Internal Revenue Code. Called tax expenditures, these provisions have generally received far less scrutiny than other forms of government spending partly because they are hidden in the tax code. If the United States is to achieve fiscal sustainability over the long term, tax expenditures can no longer be ignored.
The super committee is tasked with finding $1.2 trillion to $1.5 trillion in additional budget savings by the end of the year. Under the super committee’s mandate, these reductions can come from any source. It is not only important that tax expenditures be on the table in the super committee’s deliberations and in future budget debates but that policymakers also get it right when it comes to achieving deficit reduction through tax expenditure form.
The issue brief released today, authored by Seth Hanlon, Director of Fiscal Reform at the Center for American Progress, offers the following six principles to guide policymakers as they consider tax expenditure reform:
1. Tax expenditures are spending.
2. Like all forms of spending, tax expenditures should be assessed for cost effectiveness.
3. “Upside-down” subsidies should be made more fair and better targeted.
4. Eliminating tax expenditures benefiting seniors living on Social Security, working families, and people with very low incomes would be misguided.
5. The tax code should be scrubbed of ineffective business subsidies.
6. Common-sense, fiscally responsible reforms to tax expenditures do not have to wait for comprehensive tax reform.
To read the full brief, click here.