State and local governments depend on many different types of taxes, one of which is known as an excise tax. Like general sales taxes, excise taxes are paid on the purchase of an item. But unlike sales taxes, excise...
- The Tax Policy Blog
- CBO Projections of Spending and Tax Credits
CBO Projections of Spending and Tax Credits
The Congressional Budget Office (CBO) just released some interesting graphics, showing spending projections for means-tested programs and tax credits, i.e. those programs and tax credits that are only available to low income households. Medicaid is the largest such program, at $251 billion in 2012, followed by Supplemental Nutrition Assistance Program (SNAP) at $80 billion. The refundable portion of the earned income tax credit (EITC) is next largest, at $54 billion, while the refundable child credit costs $28 billion. The refundable portion of tax credits are scored as spending, since they exceed any tax liability.
The growth of these programs and tax credits over the last two decades mainly reflects increasing participation, as more and more people were made eligible through such legislative expansions as the 2009 American Recovery and Reinvestment Act. Participation for the EITC grew from 9 million in 1991 to 25 million in 2011, while participation for the child credit grew from zero to 21 million over the same period. The recent fiscal cliff deal extended these expansions to the EITC and child credit for another 5 years.
These programs and tax credits form a large and growing share of so-called mandatory spending, which also includes Social Security and Medicare. As the chart below shows, mandatory spending represents the majority of the federal budget, and the part that has grown most dramatically in recent years. Mandatory spending was about 10 percent of GDP for most of the 30 years prior to 2008. It leapt to 15 percent of GDP in 2009 and now remains at 13.1 percent. It is projected to increase to 14.1 percent of GDP by 2023. Meanwhile, discretionary spending, on programs like defense, roads, and other infrastructure, is on a steady decline. Discretionary spending is now 8.3 percent of GDP and set to go to a 50 year low of 5.5 percent of GDP by 2023.
Follow William McBride on Twitter @EconoWill
Get Email Updates from the Tax Foundation
We will never sell or share your information with third parties.
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.