Congress Should Ask The Administration To Put Cuts In Tax Expenditures On The Table

Our guest blogger is Sima Gandhi, a Senior Policy Analyst at the Center for American Progress Action Fund.

The House Budget Committee will hold a hearing tomorrow on a White House proposal to give the President authority to force reconsideration of items in spending bills that he concludes are not a good use of public resources. Under this rescission measure, the President could send recommended spending cuts back to Congress for an up-or-down vote.

Unfortunately, the Reduce Unnecessary Wasteful Spending Act of 2010 excludes from the Presidential scalpel one of the largest categories of government spending: tax expenditures, or more simply, government subsidies that are doled out through the tax code. The failure to include tax expenditures in the President’s spending-reduction measure leaves more than $1 trillion in spending off the table.

Lawmakers should press administration officials at tomorrow’s hearing about this regrettable omission. White House Director of the Office of Management and Budget Peter Orszag has said tax expenditures were considered for inclusion in the bill, even though the White House ultimately left them out. He indicated that the Obama Administration is “interested in exploring whether there is any way to incorporate tax entitlements and, frankly, all mandatory spending in a way that is constitutional and does not create procedural problems with the provisions.”

Unless tax expenditures are included, the Reduce Unnecessary Wasteful Spending Act would allow legislation with large swaths of wasteful spending to pass the President’s desk without a second look. Consider the current extenders bill that is before the Senate, which contains more than $30 billion in tax expenditures. Among these are a tax subsidy for NASCAR racetrack owners that will cost nearly $50 million and a $100 million tax subsidy for oil companies.

Congressmen should follow up this week by asking Orszag’s acting deputy director, Joseph Liebman, who is scheduled to testify, to identify the steps the administration has taken in this exploration. And importantly, to outline the steps the administration will take in the future.

The stakes are high. Subsidies provided through tax expenditures will amount to nearly 25 percent of total government spending. And this amount is growing. There were 133 tax expenditure items in 2000. The most recent budget listed 173 items.