Health, housing get greatest federal subsidies

AP News
Posted: Jul 24, 2012 6:28 PM
Health, housing get greatest federal subsidies

WASHINGTON (AP) — A study of federal subsidies of various sectors of the economy released Tuesday says that health care and housing combined to reap almost $1 trillion in support in the most recent year for which data was available.

The study funded by the Pew Charitable Trusts said that taxpayers subsidized health care by $743 billion in 2010, while a set of generous tax breaks was the main driver in $227 billion worth of subsidies for the housing industry.

The Pew study says that various federal subsidies like tax breaks, federal grants and other government contracts totaled $1.4 trillion. It shows that much-criticized subsidies for farmers and producers of clean energy are relatively small compared to those propping up the health care and housing sectors.

The group says $460 billion of the subsidies come as tax breaks like the mortgage-interest deduction. Such breaks are called tax expenditures, which are defined as spending that's done through the tax code.

Health care receives its huge subsidy through Medicaid grants to state governments to help provide care for the poor and disabled, spending on Medicare and tax-free treatment of the cost of employer-provided health care.

In housing, the study found that federal spending comes more in the form of tax breaks like the mortgage-interest deduction and tax-free capital gains on home sales than from grants like rental vouchers for the poor.

Education was subsidized to the tune of $129 billion in 2010, through a combination of grants to school districts and lower-income college students and tax breaks on college savings. The energy sector received $35 billion worth of subsidies, including a series of much-criticized tax breaks for oil exploration.

Some of the government subsidies of defense, the study shows, come from indirect subsidies paid when a federal contract is awarded on a noncompetitive basis. Such contracts also subsidize transportation.