ABSTRACT
Arguments rage about the welfare state – who gets what, to what effect, and at whose cost? But there is still little attention to an alternative, expensive, and largely hidden ‘tax welfare state’. This also conveys considerable benefits on many, reinforcing their efforts to achieve social and economic security, encouraging and supporting particular activities such as saving for retirement, bringing up children, or buying a home, while leaving others, generally on lower incomes, with higher taxes and fewer services. Like the public welfare state, the tax system is not only government controlled and organised
but its workings also effectively shift resources among different groups in society. However, who benefits from these tax benefits and who pays for them can differ dramatically from public welfare benefits, and it has very different visibility and accountability. It is all the more relevant to social policy analysis since it can assist governments in reducing public social spending by financially encouraging the use of alternative private provision without having to account publicly for the costs of doing so. This can undermine the welfare state and invisibly reinforce or widen inequalities, but it is by no means inevitable that this should happen.
