Entitlement Spending
Spending Entitlements and Tax Entitlements
Research Report
John Gist, AARP Public Policy Institute
May 2007
American social policy is largely the product of two types of federal programs, one type that operates directly through the federal budget, and another type that operates more indirectly through the tax code. This AARP Public Policy Institute Issue Paper compares the former (entitlement benefits) with the latter (tax benefits).
- Spending entitlement programs are the subject of much of the debate about the current and future cost of government programs and their implications for America’s fiscal and economic future. More than $1.5 trillion of federal budget dollars were spent in 2006 for this first type of federal benefit programs, including Social Security, Medicare, and Medicaid.
- Tax entitlement programs (commonly referred to as “tax expenditures” in the language of tax policy) also represent a direct benefit to the individual taxpayer but are far less visible as a budgetary expense than the large spending programs. Nearly $1 trillion in tax benefits went to individuals through this second type of program, including such tax benefits as the mortgage interest deduction and the tax exclusion for employer-provided health insurance.
It is commonly assumed that entitlement benefits are predominantly old-age benefits because the three largest programs – Social Security, Medicare, and Medicaid – are primarily or largely targeted to older Americans. However, while households age 65+ receive 62 percent of major entitlement spending benefits, they receive less than 14 percent of tax entitlement benefits. When spending and tax benefits are combined, a majority – 54 percent overall – actually flow to the under-age 65 population while those age 65+ actually receive 46 percent. (18 pages)
Pub ID: 2007-10