How much does the federal government actually spend? About $830 billion more than you think.
That’s the conclusion of a recent study by Donald Marron and Eric Toder. They analyzed so-called tax expenditures — the deductions, breaks and loopholes that clog the tax code — and sorted them into two groups: “spending substitutes” and “tax policy design…”
Other expenditures, however, are simply government spending programs by another name…
Marron and Toder counted about $600 billion of such expenditures in the 2010 tax code. Add in $230 billion in “user fees” that are counted as “negative spending” but are more like tax revenue, and you reach the $830 billion total — “almost 30 percent more than officially reported…”
But here’s the rub: Although the looming expiration of the Bush tax cuts adds urgency to reform, they also stand in its way…
The Bush tax cuts have created a “baseline” problem. The two parties can’t agree on a plan because they can’t agree on a common equation for how much revenue counts as “revenue neutral.”
Republicans work from a baseline that includes a full extension of the Bush tax cuts. The Democrats’ baseline assumes the expiration of the tax cuts for families earning more than $250,000. The Congressional Budget Office uses yet another baseline, one that assumes that all of the Bush tax cuts will expire, because that’s what current law says will happen at the end of 2012. The difference in revenue between the Republican and the current-law scenario exceeds $4 trillion over 10 years.