NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Tax Expenditures, the Size and Efficiency of Government, and Implications for Budget Reform

Leonard E. Burman, Marvin Phaup

NBER Working Paper No. 17268
Issued in August 2011
NBER Program(s):   PE

One possible explanation for the difficulty in controlling the budget is that a major component of spending —tax expenditures—receives privileged status. It is treated as tax cuts rather than spending. This paper explores the implications of that classification and illustrates how it can lead to higher taxes, larger government, and an inefficient mix of spending (too many tax expenditures). The paper then analyzes alternative budgeting approaches that would explicitly incorporate and measure tax expenditures. It concludes by analyzing ways to control tax expenditures (and other spending) and the special challenges presented by tax expenditures.

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This paper was revised on December 5, 2011

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Document Object Identifier (DOI): 10.3386/w17268

Published: Tax Expenditures, the Size and Efficiency of Government, and Implications for Budget Reform, Leonard E. Burman, Marvin Phaup. in Tax Policy and the Economy, Volume 26, Brown. 2012

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