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How Big is the Federal Government? Donald Marron & Eric Toder Urban-Brookings Tax Policy Center November 16, 2011 Tax Policy Center | www.taxpolicycenter.org Measurement Challenges • Which Activities? • Spending or Revenue? • Which Accounting System? Tax Policy Center | www.taxpolicycenter.org Three Spending Measures Tax Policy Center | www.taxpolicycenter.org Spending in the Tax Code • Tax Expenditures (aka “Loopholes”) • They Come in Two Flavors – Spending substitutes – Tax policy choices • Add “spending substitutes” to spending totals Tax Policy Center | www.taxpolicycenter.org The Top 10 Spending Substitutes •Health insurance •Mortgage interest •Imputed rent •State & local taxes •EITC •Charity Tax Policy Center | Tax Policy Choices •Capital gains step-up •401(k) plans •Accelerated depreciation •Capital gains rate www.taxpolicycenter.org History of Tax Expenditures Trends in Tax Expenditures as a Percent of GDP, 1985 and 1988-2016 10% 9% Total Tax Expenditures 8% Percent of GDP 7% 6% Spending Substitutes 5% 4% Net Spending Substitutes 3% 2% 1% Outlay Portion 0% 1985 1992 1997 2002 2007 2012 Source: Tax Policy Center calculations, based on tax expenditure estimates reported in the Budget of the United States Government, Fiscal Years 1987 and 1990-2012 Tax Policy Center | www.taxpolicycenter.org History of Spending Spending Adjusted for Tax Expenditures as a Percent of GDP, 1985 and 1988-2016 30% 25% Reclassified Spending Percent of GDP 20% Budget Spending 15% 10% 5% 0% 1985 1992 1997 2002 2007 2012 Source: Tax Policy Center calculations, based on tax expenditure estimates reported in the Budget of the United States Government, Fiscal Years 1987 and 1990-2012 Tax Policy Center | www.taxpolicycenter.org Taxes in Spending Programs • Some Receipts Are Negative Spending – Asset sales – Regulatory fees – Premiums and fees for voluntary activities • Budget measures only activities financed collectively • For full scope, add back premiums and fees Tax Policy Center | www.taxpolicycenter.org Alternative Spending Measures Tax Policy Center | www.taxpolicycenter.org Policy & Government Size Budget Budget + SLTP Budget + SLTP + User Fees NIPA NIPA + SLTP Weapons purchases Food stamps - - Medicare premiums - - - Marginal tax rates - - Mortgage interest - - Child Credit - - - Tax Policy Center | www.taxpolicycenter.org For More Information Many Studies on Tax Expenditures at www.taxpolicycenter.org Questions [email protected] Tax Policy Center | www.taxpolicycenter.org
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