Budget Scrutiny Must Include Tax Subsidies

My colleague Sima Gandhi has an excellent column on the need to include scrutiny of tax subsidies in any new procedural effort to get a lock on discretionary outlays:

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The House Budget Committee will hold a hearing Thursday morning on a White House proposal to give the president authority to force reconsideration of items in spending bills that he concludes are not a good use of public resources. Under this rescission measure, the president could send recommended spending cuts back to Congress for an up-or-down vote.

Unfortunately, the Reduce Unnecessary Wasteful Spending Act of 2010 excludes from the presidential scalpel one of the largest categories of government spending: tax expenditures, or more simply, government subsidies that are doled out through the tax code. The failure to include tax expenditures in the president’s spending-reduction measure leaves more than $1 trillion off the table.

One really unfortunate consequence of the political stigmatization of taxes has been to spur the proliferation of tax subsidies as an alternative to spending programs. It’s rarely more efficient to do something by means of a tax subsidy than a direct outlay. Worse, an outlay actually needs to be re-appropriated with each passing year whereas a tax subsidy just kind of lingers on the books unexamined, so these measures are especially likely to escape scrutiny and be used to fund things that don’t deserve the money. Heightening procedural obstacles to discretionary spending while doing nothing on the tax subsidy side is only going to further encourage tax subsidies.