Tax expenditures: a boring thing you should be outraged about

by David Roberts
22 Sep 2011 3:16 PM

Compare the following two simplified scenarios.


A. An oil company pays $1 million a year in taxes. Congress gives it a yearly cash grant of $200,000 to explore for new wells.

B. An oil company pays $1 million a year in taxes. Congress gives it a yearly tax break of $200,000 for exploration expenses.

As you can see, A and B are equivalent. In both cases, the federal government was going to get $1 million a year, but instead will get $800,000. In both cases, the federal government is foregoing $200,000 in revenue in order to favor a particular business or industry.