Monday, April 06, 2009

Tax Deductions As Stimulus?

Law Professor Yair Listokin describes in a post at Balkinization how tax expenditures (credit/deductions) are a far less efficient form of stimulating the economy than direct government stimulus, despite the fact that as he says "the total value of deductions, exclusions, and credits such as the charitable deduction nearly equals the value of direct government spending"(!) Of course, tax deductions are considerably easier to promote politically than tax increases that preclude increased government spending, which I'm sure is the main reason they are so frequently proposed and implemented despite their relative inefficiency.

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