Audit the Tax Code: Doing What Works for Tax Expenditures

Abstract

Spending programs delivered through tax expenditures should be subject to the same level of scrutiny as direct spending programs. These expenditures are used to accomplish the same goals as direct spending — they provide incentives for desired behavior, support needed services, and assist certain individuals, groups, or companies. The cost of tax expenditure programs has skyrocketed over the last two decades. Last year, spending through tax expenditures totaled over $1 trillion—significantly more than all nondefense discretionary spending. This year, tax expenditures will make up nearly 25 percent of total government spending. We should make sure tax expenditures are efficiently delivering desired results. Tax expenditures that don’t work or are misguided should be scrapped—just the same as ineffective spending programs. In order to scrutinize tax expenditures, policymakers must first treat tax expenditures as a form of spending; the government should also measure and evaluate tax expenditures; tax expenditures should be integrated into the budget process; and transparency and accountability of tax expenditure spending should be enhanced.