This paper draws on the literature that explains why governments spend procyclically, to predict the pattern of cyclical expenditure across government budgets. Procyclical expenditure increases at a faster rate than income in economic upturns and falls at a faster rate in recessions. The more politicians indulge pressures to increase expenditure in an economic upturn, the more they find it difficult to sustain expenditure in a recession. In this paper, differences in politicians' willingness to increase expenditure in an economic upturn are relevant when predicting patterns of cyclical expenditure across budgets. Predictions are tested with reference to expenditures from government budgets in 23 OECD countries (over the period 1995-2006). Central government capital expenditure and sub-central government expenditure are systematically more procyclical than expenditures from other budgets.
The federal government devotes over a trillion dollars each year to tax provisions that pursue "nontax" goals. Scaling back these tax expenditures should be a high priority. Yet one-size-fits-all limits are often proposed, and are not good policy. Each tax expenditure generates its own mix of positive externalities and private benefits (or "programmatic benefits"). To choose the right limit, we should consider what programmatic benefits we would lose. The goal should be to reap programmatic benefits at lower cost. Different strategies are appropriate for each tax expenditure, including: tightening the definition of favored conduct; focusing on claimants who are easiest to motivate; favoring claimants who use the subsidy more effectively; calibrating how much favored activity we subsidize; and changing the government agency that administers the subsidy. We also should account for excess burden and distribution. Does repeal or a limit influence labor or savings decisions? Does it affect planning and administrative costs? Does it bring is closer to the distribution we want? In addition to proposing this three-part framework for limiting tax expenditures, which focuses on programmatic benefits, excess burden, and distribution, this Article also analyzes seven different limits. They have very different effects. For example, a "cap" eliminates the subsidy for high levels of favored activity. In contrast, a "floor" disallows the subsidy for low levels. "Haircuts," "maximum fractions," and "phaseouts" preserve the subsidy for both high and low levels of favored activity, but in weakened form. Each limit offers a different mix of strengths and weaknesses, making it a better fit for some tax expenditures than others. Like limits, tax expenditures also vary in systematic ways. This Article identifies an important distinction among them. For some tax expenditures, marginal benefits vary only with the activity level of all claimants in the aggregate; for others, marginal benefits also vary with the activity level of each claimant. When we subsidize green energy, for instance, the aggregate is our main concern; the goal is to replace as much carbon-based energy as possible, and it matters less who is doing so (as long as they do it well enough). In contrast, when we subsidize health insurance, we care a lot about how much insurance each individual has. The difference between what this Article calls "aggregate" subsidies (like green energy) and "individually-based" subsidies (like health insurance) can influence the type of limit we want. For example, caps are likely to be a better fit for individually-based subsidies than aggregate ones, since we care more about how much each claimant claims. This Article also makes a number of other recommendations, including: first, the subsidy rate often should vary for different tax expenditures; second, instead of using "basket limits" that govern a group of tax expenditures, we should tailor a separate limit for each one; and third, the subsidy rate often should vary with income.
The federal government devotes over a trillion dollars each year to tax provisions that pursue "nontax" goals, such as the deduction for mortgage interest and the exclusion for employer-provided health insurance. Scaling back these "tax expenditures" should be a high priority, as many have urged. Yet too often, the same limit is suggested for a broad range of tax expenditures. In the 2013 budget deal, for instance, Congress revived a single limit on all itemized deductions called the "Pease rule." In 2012, both presidential candidates proposed their own one-size-fits-all limit. In the same year, the United Kingdom imposed a single cap on all personal deductions. Likewise, the Bowles-Simpson Commission, Martin Feldstein, Edward Kleinbard, and other distinguished commentators have each recommended their own version of uniform treatment.
In the implementation of fiscal policy, public authority used many kinds of fiscal instruments. Except direct expenditures in achieving the policy objectives, many countries use tax preferences, tax reliefs which are called tax expenditures. Those instruments seem to be very similar, so they are often considered to be substitutes. However, because of their specificity, TEs seem to be less transparent and often beyond social control. Therefore, in implementing the principle of transparency of fiscal policy, it seems necessary to compare current instruments with their current control. ; W realizacji polityki fiskalnej wykorzystywane jest szerokie instrumentarium narzędzi władzy publicznej. Oprócz bezpośrednich wydatków budżetowych w osiąganiu celów tej polityki stosowane są konstrukcje określane mianem tax expenditures. Instrumenty te wykazują wiele podobieństw między sobą, dlatego często uznawane są za substytucyjne. Jednak ze względu na swoją specyfikę TEs wydają się być mniej transparentne i często pozostają poza kontrolą społeczną. Z tgo powodu w realizacji zasady transparentności polityki fiskalnej wydaje się być konieczne bieżące porównywanie stosowanych instrumentów wraz z bieżącą ich kontrolą.
Examines some of the political and fiscal considerations arising from the use of tax expenditures. Also discusses what expected trends would be under the Conservative government elected in 1979. (Abstract amended)
This is the first full scale World Bank Public Expenditure Review (PER) for Armenia. The primary objective of the Report was to review the main fiscal trends in Armenia for the period of 1997-2001 and develop recommendations with respect to further fiscal adjustment, expenditure prioritization, and budget consolidation. The report has the following structure. Chapter 1 reviews the main features of the Government's fiscal adjustment effort, initiated in the mid 90-s. It is focused on the analysis of aggregated indicators of fiscal performance such as deficit, public debt, budget arrears, and tax revenues. Chapter 2 looks at the main expenditure trends in the Armenia consolidated budget for 1997-2001 and makes an assessment of the quality and depth of expenditure restructuring undertaken in this period. Chapter 3 looks at the public sector's activities that remain non-reflected in the regular Government budget, which includes extra- budgetary funds, in-kind external grants, subsidies provided by the state-owned companies in the energy and utility sectors, and operations of the Social Insurance Fund. Chapter 4 presents in-depth analysis of progress made to date in the area of expenditure management and suggests a draft medium-term action plan to address identified weaknesses in budget preparation, presentation, execution, and reporting. Annexes 1 and 2 reflect more specific recommendations with respect to upgrading budget management procedures and the regulatory framework. Chapters 5-7 review expenditure policies in the main social sectors (health, education, social protection and insurance) and provide recommendations on: (i) how current expenditures could be made more efficient; (ii) what should be the main direction for intra-sectoral expenditure reallocation; and (iii) what should be medium-term targets for an increase in public expenditures in these sectors. Chapter 8 estimates a minimum level of budget support in core public infrastructure, which would stop deterioration of existing core assets in respective ...
"In this paper we revisit two well-known facts regarding lifecycle expenditures. The first is the familiar "hump" shaped lifecycle profile of nondurable expenditures. We document that the behavior of total nondurables masks surprising heterogeneity in the lifecycle profile of individual sub-components. We find, for example, that while food expenditures decline after middle age, expenditures on entertainment continue to increase throughout the lifecycle. These patterns pose a challenge to models that emphasize inter-temporal substitution or movements in income, including standard models of precautionary savings, myopia, and limited commitment, to explain the lifecycle profile of expenditures. Second, we document that the increase in the cross-sectional dispersion of expenditure over the lifecycle is not greater for luxuries. In particular, the dispersion in entertainment expenditure declines relative to food expenditures as households become older, casting further doubt on theories that emphasize (exclusively) shocks to permanent income to explain the rising cross sectional expenditure dispersion over the lifecycle. We propose and test a Beckerian model that emphasizes intra-temporal substitution between time and expenditures as the opportunity cost of time varies over the lifecycle. We find this alternative model successfully explains the joint behavior of food and entertainment expenditures in the latter half of the lifecycle. The model, however, is less successful in explaining expenditure patterns early in the lifecycle"--National Bureau of Economic Research web site
This chapter has two objectives. First, it places public expenditure management (PEM) in the broader context of the role of the state, good governance, macroeconomic policy, and the changing environment (especially in information and communication technology). To view PEM only through a technical prism would fundamentally distort the picture. Second, the chapter provides a quick run-through of the entire expenditure management cycle. This chapter can therefore serve as a map of the book for the thorough reader, as well as a standalone sketch of the key issues for the busy public official (who should also read the last section of the concluding chapter 17). For both types of readers, we hope this brief overview will at least bring home the point that the management of public expenditure is neither a purely technocratic issue nor suitable for simple quick fixes, on the one hand, yet is always amenable to some practical improvement, on the other.
