Tag Archives: tax expenditures

Efficiency versus Transparency

A couple of days ago, a friend re-posted a FaceBook meme–one of those numerous sardonic messages on what appear to be digital postcards. The message was  “for all the taxes they take out of my paycheck, the least they could do is send me a picture of the ghetto family my tax money is supporting, to hang on my refrigerator.”

My friend’s response was perfect: “Here you go: Here are pictures of Walmart, Kaiser Permanente, Citibank, BP…”

Leave aside, for this discussion, the casual racism (we know what “ghetto” meant) and the mean-spiritedness, the implication that lazy “takers” are being supported by self-styled,  hard-working “makers.”

What the statement really reflected was a widespread lack of understanding of corporate welfare, and the magnitude of the tax dollars flowing to profitable companies through the tax code.

Let’s stipulate that some of these subsidies can be justified. (Others not so much.) Let’s also stipulate that it is more efficient to subsidize an activity through the tax code than through a grant. (Why send money to the federal government and then have that government send it back?)

Let’s also stipulate, however, that there are situations in which transparency should trump efficiency. This is one of those situations.

Every time lawmakers vote to make what CPAs call a “tax expenditure,” that credit or deduction represents money otherwise due to the federal government that it doesn’t take in. The process is more efficient, but the fiscal impact is no different from a payment out of the treasury.

What is different is the ability of the public to monitor the decision to subsidize and to evaluate the justification for the subsidy.

What the federal government pays out in TANF or SNAP is visible; what it pays to GE or Exxon or Walmart is buried in the bowels of the Internal Revenue Code.

If we insisted that all corporate welfare payments also be paid in cash, in the full light of day, we might be able to begin a reasonable discussion of the merits, magnitudes and justifications for those subsidies.

It probably would be news to the people who posted that vile Internet message, but they are supporting a whole lot of people who not only aren’t “ghetto,” but who are pulling down salaries most of us ordinary “makers” can only dream of.