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Report: Gov’t May Be Bigger Than You Think

Apr. 2, 2012 6:45pm Becket Adams

CNN Money asks a simple question: Which costs the federal government more? Cutting a check for $2,100 or giving a tax break worth $2,100?

Apparently, they cost the same, according to CNN Money and the Urban-Brookings Tax Policy Center. Wait a minute. How does that work?

“[Because] in terms of policymaking, many tax breaks are the functional equivalent of cash,” CNN Money reports.

But the tax break isn’t counted as spending. In fact, while the check for $2,100 is classified as “federal spending,” the tax break doesn’t even show up on the federal budget. So when you hear a policymaker talk about lowering the deficit or expanding/reducing the size of government, most of them don’t factor in tax breaks.

The CNN report goes on to argue that because tax breaks get the same results as government checks (e.g. giving homeowners deductions on mortgage interest, giving tax credits to “green” energy companies, etc), they’re practically interchangeable, right?

Not quite: the government check is directly funded by taxpayers while the tax break comes at a cost to no one.

But this is not to say that tax breaks should be disregarded from the deficit discussion. As taxes generate income, and fixing the deficit is all about balancing revenue with expenditures, then tax breaks should be included.

In fact, some analysts including Donald B. Marron, director of the Tax Policy Center and former director of the Congressional Budget Office, and Eric Toder believe tax breaks should counted as spending in the federal budget.

Let’s momentarily put aside the argument that tax breaks are the “functional equivalent of cash” and take Marron’s advice by including tax breaks in the federal budgeting — do you know what this means? It mean the government actually takes up a bigger chunk of the economy than is typically reported because tax breaks (“clear spending substitutes”) haven’t been counted as spending, Marron and center co-director Eric Toder conclude in their report.

“In 2007, for example, federal spending was officially recorded as 19.6 percent of GDP. If you add in the tax preferences that Eric [Toder] and I believe are effectively spending (the SLTPs), that figure rises to 23.7 percent,” Marron writes.

“In round terms, the government was one-fifth larger than traditional budget figures indicate,” he adds.

Graph Source: dmarron.com

And it’s not just “tax preferences” that are excluded from budgeting discussions.

“User fees and other ‘offsetting receipts’ that come in to the government, such as Medicare premiums, are simply used to reduce reported government spending,” CNN Money reports, “They’re not actually counted as a revenue source, which is effectively what they are.”

So wait, wouldn’t this also add to the size of government? According to Marron and CNN Money — yes.

“…[add back] user fees and premiums to get the full size of the federal government: 25.4 percent of GDP in 2007,” Marron writes.

But why should the feds start adding “user fees,” “premiums,” and “tax preferences” to their budget and deficit discussions?

CNN Money answers:

For one thing, it would help change the conversation about deficit reduction and tax reform. Policymakers could gain a fresh perspective on how much the government spends — both directly and through the tax code.

And does Marron have to say?

The time has come for serious reform. America needs to fix its broken tax system and find additional revenue to help reduce our persistent budget deficits. The best way to achieve both aims is to take a hatchet to the thicket of spending-like tax preferences. Many preferences should simply be eliminated; those deemed to serve important policy goals should be restructured to be simpler, fairer, and more effective. Lawmakers can then use the resulting revenue to cut tax rates across the board and reduce the deficit.

Such reform is long overdue. It won’t be easy, but the enormity of our budget problems may finally be enough to get liberals, moderates, and conservatives to join together to get it done.

Of course, these conclusions and recommendations are wholly contingent upon whether or not one actually believes tax breaks are the “functional equivalent of cash” or whether the government “giving up” revenue it hasn’t earned is the same thing as handing out a taxpayer-funded check.

This story has been updated.

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Comments (41)

JEANNIEMAC
Posted on April 3, 2012 at 11:27am
http://www.breitbart.com/Big-Government/2012/04/02/obama-2012-and-facebook-your-privacy-diminished

Facebook and Google are leftist sites. Facebook was largely responsible for helping to get Obama elected through this “social network”. Google manages search results to bring up favorable listings for Obama. Notice also, that if any search is made using the name “Obama”, his website isautomatically including in the listings.

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JEANNIEMAC
Posted on April 3, 2012 at 11:24am
http://goluckydonald.newsvine.com/_news/2012/03/31/10949625-obama-authorizes-himself-to-declare-martial-law

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sjohn70037
Posted on April 3, 2012 at 9:58am
I can fix this problem: Every government worker take out your social security card. If the last digit is an odd number YOUR FIRED. Thank you.

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Itsjusttim
Posted on April 3, 2012 at 1:34am
When people finally figure out that the government, Progressives, Fabians – think they all own everything and you merely are allowed to use it – then it will all make sense.

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- zippo
  Posted on April 3, 2012 at 6:24pm
  Amen brother!!
  
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SanDiegoCountyCitizen
Posted on April 3, 2012 at 12:41am
Resistance Is NOT Futile!

I will not comply!

Death to the Borg!

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- Quixotic-911
  Posted on April 3, 2012 at 11:03am
  Ha Ha! Ever since I first saw the Borg on Star Trek I’ve been calling them the Space Commies.
  
  Report this comment
- johnjamison
  Posted on April 3, 2012 at 1:02pm
  If resistance was easy it would be lame.
  It’s the journey is as important as the destination.
  
  Report this comment
Detroit paperboy
Posted on April 3, 2012 at 12:36am
So, the money a thief DOESN’T STEAL from you, is costing the thief money ? Uhhh do I have that correct ???

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- johnjamison
  Posted on April 3, 2012 at 11:35am
  Pretty much sums it up.
  Only in the insanity of the LIBERAL progressive mind doesn’t not taking something from someone earned it with hard work and countless hours count the same as giving someone who did absolutely nothing something someone else earned.
  
  Report this comment
Stoic one
Posted on April 3, 2012 at 12:15am
Well of course tax breaks/credits are money. the four new windows that I personally installed three years ago netted me an additional $225 on my tax return; that is how much less was taken form my wife & I. That credit was 30% unlimited energy credits.

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- Stoic one
  Posted on April 3, 2012 at 12:18am
  This is why giant companies like GE have full time tax departments – they cross the threshold for so many tax credits, deductions, & incentives.
  
  This is the gov’t trying to shape the country into the image that it believes the country should be in.
  
  Report this comment
Skrewedretiree
Posted on April 2, 2012 at 11:14pm
Wah? The Government be way too big an’ be spendin’ too much money? Wow! ‘Houd’a thunk it?
Sort of like the drunk waking up after his car went through the guardrail on a high mountain road and he has time to see the final plunge to the end…….Duh!

Remember in November/Lock and load.

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grickm
Posted on April 2, 2012 at 10:10pm
The government’s power to tax or to not tax is the root cause of most of our problems. It has led to all the lobbying, crony capitalism, and government overreach that is destroying our economy and the true capitalist system that made this country great.

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- Snowleopard {gallery of cat folks}
  Posted on April 2, 2012 at 11:11pm
  Indeed.
  
  Report this comment
South Philly Boy
Posted on April 2, 2012 at 9:36pm
Fed Govt Gets TOO MUCH TAX MONEY

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myheadhurts
Posted on April 2, 2012 at 9:28pm
I don’t agree with the premise of this article, although I certainly think this spending thing is beyond insanity. The article supposes that tax credits are the same as expenses. That’s not completely true. If the IRS cuts a check to Joe the Plumber for fixing the toilets, that is an expense. If the IRS cuts a check to Joe the Plumber for a tax refund, that is not an expense. It is a refund of overpayment. If the IRS gives Joe a tax credit, then that is part of the tax code and is NOT included in Revenue. A tax credit is not an expense. It is a reduction of tax, just like dropping a tax rate from 15% to 10%. If the IRS cuts a check to Joe as a REFUNDABLE tax credit, that means he gets the money whether he paid any taxes in or not. So REFUNDABLE tax credits should be included to the extent they create a ‘negative tax’, but not all tax credits do that. Just trying to clarify where I think the authors should have.

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lukerw
Posted on April 2, 2012 at 8:57pm
It is not Capitalism that is Broke… it is the Government of the US!

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- black9897
  Posted on April 2, 2012 at 9:09pm
  No, no I think I already knew the Gov. is waaaaaaayy too big. Be nice if it were the size like it was in 1800.
  
  Report this comment
HorseCrazy
Posted on April 2, 2012 at 8:54pm
what are you telling me the government is not efficient and out of control? no kidding

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flipper1073
Posted on April 2, 2012 at 8:00pm
Hate to be the one to say it but here go’s
YA THINK ?

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Byrdi
Posted on April 2, 2012 at 7:53pm
The left even shows the Bush tax cuts as deficit spending. They stick it all on Bush debt. Of course they don’t realize that there was more revenue taken in at the lower rate than at the Clinton levels. That is true. I checked on the the figures. Maybe they are counting all the checks sent to low income people who didn’t pay any taxes.

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taxpro4u03
Posted on April 2, 2012 at 7:36pm
http://www.apfn.org/apfn/bcolony.htm
Hosea 4:6
My people are destroyed for lack of knowledge: because you have rejected knowledge, I will also reject you, that you shall be no priest to me: because you have forgotten the law of your God, I will also forget your children

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doomytram
Posted on April 2, 2012 at 7:30pm
Oblamer was meeting with Carlos Slim of Mexico by proxy and Canada’s head today. Has the disastrous Oblamer and his commie media shills fleeced us into forgetting all about the North American Union? The Amero will be the currency and we will just go straight communist, like Maxine Watters and the Pink Cowboy hat wearing Congresswoman from Florida want us to do.

Really, have some of us forgotten about the plan for saving us from our own insolvency?

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soybomb315
Posted on April 2, 2012 at 7:29pm
do you need any more evidence of the urgency to slash the federal budget, eliminate entire departments, and reduce the scope of the federal government?

Ron Paul – defender of the constitution and enemy of big government

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- MAMMY_NUNN
  Posted on April 2, 2012 at 11:30pm
  If you cut departments and programs that would reveal the rats and all the spare change that fell through the cracks.
  
  Report this comment
godhatesacoward
Posted on April 2, 2012 at 7:26pm
If you actually knew the # suicide would skyrocket!

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- doomytram
  Posted on April 2, 2012 at 7:41pm
  We should spend more, regulate more, and borrow more that’s the ticket. Yeah, yeah, that’s what we should do. In our idiocracy, Maxine Watters, Jarrett, and Obama want us to work for them and under them…The People will work for MacDonalds, WalMart, State, and Federal Polit bureaurats. People will work for the above or have cards to get your pink slime from the above….Gatorade will water the flowers and nourish the ballers.
  
  Report this comment
- godhatesacoward
  Posted on April 2, 2012 at 7:51pm
  Awesome “It’s got electrolytes”
  
  Report this comment
- godhatesacoward
  Posted on April 2, 2012 at 7:56pm
  Same page doomy. MIght have messed up some wording.
  
  Report this comment
turkey13
Posted on April 2, 2012 at 7:24pm
“Nothing is easier than spending public money. It does not appear to belong to anybody. The temptation is overwhelming to bestow it on somebody.” Calvin Coolidge

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progressiveslayer
Posted on April 2, 2012 at 7:21pm
Our founding fathers wouldn’t recognize the beast this government has become and the government wants to regulate every aspect of our lives,health care what we drive what we eat,every thing!

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- taxpro4u03
  Posted on April 2, 2012 at 10:23pm
  I contend that they DID know… Who WERE the 3 sent to negotiate the TREATY of 1783? Were they…. ‘esquires?’ — At law — what IS in fact… an ‘esquire?’ – I submit that they merely negotiated a ‘peace accord’ (i.e. cease hostilities of killing one another) — but the historical record shows that in FACT they merely negotiated PRIVILEGES to the colonies…. And why would a ‘victor’ SUBMIT to terms FAVORING (written by) the conquered? — in the instance here — it was merely acknowledging the King’s RIGHT to MONEY/minerals etc from his business venture (original charters, STILL in effect essentially) “Gentlemen, you can say a lamb has 5 legs by calling his tail a leg. But it does NOT change the fact that the leg called a tail is still a tail…’ Convoluted thought processes and word gymnastics have MOST people at wits end…
  
  Report this comment
iroquois
Posted on April 2, 2012 at 7:20pm
What you expect from a spin merchant and his group of communist’s We need to make Barry and his gang go away.

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doomytram
Posted on April 2, 2012 at 7:19pm
Nothing is bigger than this federal gov’t in terms of ridiculousness. Our Banana Republic spends or borrowers more and more as our people and jobs shrink and shrink. Oblamer still thinks we can spend more and grow our government more and get out of this mess. He, Oblamer, is like that lunatic Paul Krugman.

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thx1138v2
Posted on April 2, 2012 at 7:12pm
The difference is quite simple.

When the government “cuts a check” they take the money from someone else, in the form of a tax payer, and give it to a third party.

A “tax break” allows the taxpayer to keep his money and use it as desired.

Only in Washington, D.C. is not taking money from someone considered an “expense”. Putting the shoe on the other foot, that’s like saying I have $1000 of inventory on my shelves and the government “cost” me a $1000 by not buying it.

I’m sure glad to learn this. Of course I’ll have to redo my income taxes now for all the inventory the government didn’t buy from me.

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- kaydeebeau
  Posted on April 2, 2012 at 7:33pm
  The Gov’t starts with the assumption that all money is theirs
  
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Darmok and Jalad at Tanagra
Posted on April 2, 2012 at 7:05pm
So, Govt. is like a woman in a moomoo, bigger than you think. Maybe we should make the Govt. wear spandex, then we can see exactly how big it’s become.

Remember, spandex is a privilage, not a right.

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- taxpro4u03
  Posted on April 2, 2012 at 7:33pm
  Absolutely — now — re-read the Treaty of 1783 — YOU follow the HISTORY and then YOU decide whether they are ‘rights’ or ‘privileges.’ — Here’s a lil jumpstart link for ya — bear in mind — QUESTION with boldness. the historical record (textbook secular education stuff) just tain’t SO…607 pages so set aside tome time to re-evaluate and revisit some critical thinking skills –>http://www.apfn.org/apfn/bcolony.htm
  
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- Darmok and Jalad at Tanagra
  Posted on April 2, 2012 at 7:44pm
  Whaaaaa???? I didn’t know they had Spandex in 1783, but that might explain why George Washington never had kids….Martha, you got a big booty.
  
  Report this comment

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