Policy Forum: Tax Expenditures—Lessons from the Elimination of Ontario's Tuition and Education Tax Credits

Stanley Surrey and others have highlighted tax expenditures as being hidden forms of spending that can evade the type of analysis and scrutiny applied to direct spending programs, allowing inefficient and inequitable programs to persist. But there is only limited empirical evidence on differences in the persistence of similar programs in a tax measure compared to a direct spending form. The conversion of Ontario's education and tuition tax expenditures into a direct form of spending via the existing student aid program provides an interesting case study. As discussed in this article, although the tax credits had never been the subject of a value-for-money audit, the student aid program was reviewed in 2018 shortly after the changeover, to hearty criticism of its distributional effects despite its being less regressive than the tax credit versions. This led to substantial cuts in the program, in line with views on the persistence of tax expenditures.