Don’t tax and spend?

“employed by CIS, which does not accept government money”
Is it not the case that there is a special section of the Income Tax Assessment Act which makes donations specifically to the CIS tax deductible (along with donations to a particular left leaning think tank)?

That’s commenter Spiros on the issue of who pays my CIS salary.
The argument here is that because donations to the CIS (please make one:)) are tax deductible that is a loss to the government and therefore the CIS (and through it, me) is in receipt of government money. In broad terms, this is a widely accepted type of analysis with the Budget papers providing estimates of ‘tax expenditures’ and my fellow critic of big government Des Moore including them in his estimates (pdf) of the size of government.

I don’t dispute that tax expenditures are a significant aspect of government policy – like ordinary taxing and spending, and like much other regulation, tax exemptions, deductions and concessions are (desirably or not) distortionary in that they steer behaviour towards particular activities and (implicitly) away from other activities. Tax expenditures are criticised for receiving less scrutiny than direct expenditure. And as the government still has to raise a certain amount of money to meet its outlay commitments, it means that other tax rates have to be higher to bring in the required amount of revenue.

I am not, however, entirely convinced by the standard analysis. Continue reading “Don’t tax and spend?”