After More Than a Decade of Delay, Tax Expenditure Review is Back on the Agenda


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At a hearing before the House Budget Committee this past Tuesday, the OMB’s Chief Performance Officer, Jeffrey Zients, expressed his full support for the basic proposal laid out in a report by Citizens for Tax Justice last week – namely, that the multitude of spending programs buried within our nation’s tax code need to be reviewed.

During his questioning of Mr. Zients, Representative Lloyd Doggett said that he was “encouraged by the comments in the President’s budget that ‘programs will … not be measured in isolation, but assessed in the context of other programs that are serving the same population or meeting the same goals.’”  At the same time, however, Mr. Doggett explained that “I don’t see how you can evaluate … [for example] Pell grants, Perkins loans, and work study, without evaluating and comparing them with a rather substantial tax reduction … the higher education tax credit that I authored. … But I don’t see OMB doing anything on that.”

In response, Mr. Zients stated: “I totally agree with the horizontal approach, in that the tax expenditure side should be part of that along with the [spending] programs that we were talking about.  So, 100% agreement there.”  In addition, while admitting that tax expenditures had not yet been a focus during his brief tenure at OMB, Mr. Zients promised to make them a priority moving forward.

This statement from the OMB’s top performance official represents a major departure from the delays within the Executive Branch to which we’ve become accustomed.  Over sixteen years ago, the legislative history behind the Government Performance and Results Act (GPRA) made clear that Congress wanted the Executive Branch’s performance review efforts to include the evaluation of tax expenditures.  And for nearly fourteen years, the President’s budget has identified tax expenditure review as a “significant challenge” that should be addressed in the near future.

Both Mr. Zients and Mr. Doggett should be commended for recognizing the flaw in OMB’s narrow focus on only direct spending programs.  The omission of tax expenditures from review is hardly a small issue – in total, the federal government actually “spends” more via special tax breaks than it does through the entire discretionary spending budget.  Continuing to exclude these programs from review would cripple the ability of President Obama’s OMB to accurately gauge government performance.

For more detail on the need for tax expenditure review, the federal government’s past efforts toward creating a review system, and the potential issues associated with creating such a system, be sure to read the CTJ report: Judging Tax Expenditures.

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