The Hidden Welfare System Revisited
A report by the National Council of Welfare on the Growth in Tax Expenditures

Publisher:  National Council of Welfare, Ottawa, Canada
Year Published:  1979
Pages:  32   Resource Type:  Article
Cx Number:  CX1025

This document is an analysis of government spending through tax deductions. Tax deductions are an indirect way of spending money. The government does not declare how much money is spent in this way, as it does in relation to direct spending.

Abstract: 
This document is an analysis of government spending through tax deductions. Tax deductions are an indirect way of spending money. The government does not declare how much money is spent in this way, as it does in relation to direct spending.

The National Council of Welfare points to many examples of indirect spending. Tax incentives to businesses, the new family allowance program, Registered Retirement Savings Plan (RRSP) and Registered Home Ownerships Savings Plans (RHOSP) are but some of the ways the government spends indirectly. The beneficiaries of such spending do not readily see that it is government spending, and so are willing to take the deduction while criticizing the government for lack of restraint in direct spending.

The lack of accounting for tax expenditures is not the only problem in the "hidden welfare system." The authors also point out that many of the tax rewards and economic incentives benefit the rich and not the poor. This is documented in reference to RRSPs and RHOSPs. These programs benefit the rich in two ways. First, only those who are better off can afford to save by investing in these plans. Second, of course, is that the more one saves (up to a fixed amount) the more one can claim as a tax deduction.

This analysis leads to the proposal that the government be required to publish accounts of its tax spending as well as its direct spending. This is the first step needed in a move to more control of such spending and an accountability to the public for it.