Total Social Spending

Abstract

A comprehensive account of the total amount of resources that each OECD country devotes to social support has to account for both public and private social expenditures, and the extent to which the tax system alters the effective amount of support provided. To capture the effect of the tax system on “gross” (i.e. before tax) social expenditures, account has to be taken of the government “clawback” on social spending through the direct taxation of benefit income and the indirect taxation of the goods and services consumed by benefit recipients. Moreover, governments can pursue social goals by awarding tax advantages for social purposes (e.g. child tax allowances). From the perspective of society, “net” (i.e. after tax) social expenditure, from both public and private sources, gives a better indication of the resources used to pursue social goals. From the perspective of individuals, “net social expenditure” reflects the proportion of an economy’s production on which benefit recipients lay claim.