How Big is the Federal Government?
Donald Marron & Eric Toder
Urban-Brookings Tax Policy Center
November 16, 2011
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Measurement Challenges
• Which Activities?
• Spending or Revenue?
• Which Accounting System?
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Three Spending Measures
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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
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The Top 10
Spending Substitutes
•Health insurance
•Mortgage interest
•Imputed rent
•State & local taxes
•EITC
•Charity
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Tax Policy Choices
•Capital gains step-up
•401(k) plans
•Accelerated
depreciation
•Capital gains rate
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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 |
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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 |
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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
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Alternative Spending Measures
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Policy & Government Size
Budget
Budget
+ SLTP
Budget
+ SLTP +
User Fees
NIPA
NIPA
+ SLTP
Weapons
purchases
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Food stamps

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-
-
Medicare
premiums

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-
-
-
Marginal tax
rates
-

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-
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Mortgage
interest
-
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-
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Child Credit
-
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-
-
Tax Policy Center |
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For More Information
Many Studies on Tax Expenditures at
www.taxpolicycenter.org
Questions
dmarron@urban.org
Tax Policy Center |
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