How large are individual income tax incentives for charitable giving? How did the TCJA affect incentives for charitable giving? Taxes and Health Care How much does the federal government spend on health care? Who has health insurance coverage? Which tax provisions subsidize the cost of health care? How does the tax exclusion for employer-sponsored health insurance work? What are premium tax credits?
What tax changes did the Affordable Care Act make? How do health savings accounts work? How do flexible spending accounts for health care expenses work?
What are health reimbursement arrangements and how do they work? How might the tax exclusion for employer-sponsored health insurance ESI be reformed? Taxes and Homeownership What are the tax benefits of homeownership? Do existing tax incentives increase homeownership? Taxes and Education What tax incentives exist for higher education?
What tax incentives exist to help families pay for college? What tax incentives exist to help families save for education expenses? What is the tax treatment of college and university endowments? Tax Complexity Why are taxes so complicated? What are the benefits of simpler taxes? What policy reforms could simplify the tax code?
Wealth Transfer Taxes How do the estate, gift, and generation-skipping transfer taxes work? Who pays the estate tax?
How many people pay the estate tax? What is the difference between carryover basis and a step-up in basis? How could we reform the estate tax? What are the options for taxing wealth transfers? What is an inheritance tax? Payroll Taxes What are the major federal payroll taxes, and how much money do they raise?
What is the unemployment insurance trust fund, and how is it financed? What are the Social Security trust funds, and how are they financed? Are the Social Security trust funds real? What is the Medicare trust fund, and how is it financed? Excise Taxes What are the major federal excise taxes, and how much money do they raise?
What is the Highway Trust Fund, and how is it financed? Energy and Environmental Taxes What tax incentives encourage energy production from fossil fuels? What tax incentives encourage alternatives to fossil fuels? What is a carbon tax? Business Taxes How does the corporate income tax work? What are pass-through businesses? How are pass-through businesses taxed?
Is corporate income double-taxed? Tax Incentives for Economic Development What is the new markets tax credit, and how does it work? What are Opportunity Zones and how do they work? Taxes and Multinational Corporations How does the current system of international taxation work? What are the consequences of the new US international tax system? How does the tax system affect US competitiveness?
How would formulary apportionment work? What are inversions, and how will TCJA affect them? What is a territorial tax and does the United States have one now?
What is the TCJA repatriation tax and how does it work? What is the TCJA base erosion and anti-abuse tax and how does it work? What is global intangible low-taxed income and how is it taxed under the TCJA? What is foreign-derived intangible income and how is it taxed under the TCJA? Comprehensive Tax Reform What is comprehensive tax reform?
What are the major options for comprehensive tax reform? Broad-Based Income Tax What is a broad-based income tax? What would and would not be taxed under a broad-based income tax? What would the tax rate be under a broad-based income tax? National Retail Sales Tax What is a national retail sales tax? What would and would not be taxed under a national retail sales tax? What would the tax rate be under a national retail sales tax?
What is the difference between a tax-exclusive and tax-inclusive sales tax rate? Who bears the burden of a national retail sales tax? Would tax evasion and avoidance be a significant problem for a national retail sales tax? What would be the effect of a national retail sales tax on economic growth? What transition rules would be needed for a national retail sales tax?
Would a national retail sales tax simplify the tax code? What can state and local sales taxes tell us about a national retail sales tax? What is the experience of other countries with national retail sales taxes? How would a VAT be collected? What would and would not be taxed under a VAT? What would the tax rate be under a VAT? What is the difference between zero rating and exempting a good in the VAT? Although there are some small cross-country variations in the way social expenditure is distributed, the three priorities are predominantly the same across the OECD.
Old age expenditure in the form of pensions and elderly care typically receives the largest allocation of social spending, followed by health, with either family or incapacity-related benefits typically coming in third. On average, OECD countries spend per cent of GDP on old age care, 6 per cent on health, and 2 per cent on both family and incapacity-related benefit.
And the relative importance of these branches has remained largely constant since The visualization shows the share of central government expenditure that goes to the compensation of government employees.
Compensation of employees includes all salaries and benefits both in cash and in kind. As we can see, the salaries of public servants and other government employees are an important component of public spending in most countries. Yet differences between countries are very large. Governments around the world often rely on the private sector to produce and manage goods and services. The two visualizations show the importance of public procurement in OECD countries and partner countries providing comparable data.
The first chart shows the value of total general government procurement as percentage of GDP, while the second chart shows the relative weight of procurement within total expenditure i. As we can see, public sector purchases from the private sector are significant in many high-income countries. Public procurement comprises many different forms of purchases. Public procurement includes, for example, tendering and contracting in order to build large infrastructural projects.
However, public procurement goes beyond infrastructure. It also includes, for example, purchases of routine office supplies. Generally speaking, the part of public procurement that does not fall within the category of gross fixed capital formation e.
This form of procurement often relies on short-term contracts. According to the definitions used by the OECD, outsourcing includes both intermediate goods used by governments such as procurement of information technology services , or the outsourcing of final goods and services financed by governments such as social transfers in kind via market producers paid for by governments.
The visualization shows total expenditures on general government outsourcing accounting for both intermediate and final goods , as a share of GDP. The data is from , and is available only for a selection of OECD member countries plus a few other partner countries reporting data to the OECD under the same methodology.
As we can see, governments in many high-income countries spend substantial resources via outsourcing. Public procurement strategies available to governments are varied. Governments may choose to take responsibility for financing, designing, building and operating infrastructure projects — and they simply outsource specific elements. Or they may choose to pursue a public-private partnership, where private actors directly take responsibility for all these aspects, from financing to operation.
These initiatives typically take the form of long-term contracts. The blue series shows the total value of projects in US dollars scale in the left vertical axis , while the orange series shows the total number of projects scale in the right vertical axis. As we can see, the last two decades have seen a marked increase in public-private partnerships in low and middle-income countries. The estimates by sectors and world regions suggests that electricity and roads, specifically in South Asia and Latin America, have been the key drivers of these aggregate trends.
We have already pointed out that government expenditure as a share of national income is higher in richer countries. The visualization provides further evidence of the extent of this correlation.
The vertical axis measures GDP per capita after accounting for differences in purchasing power across countries , while the horizontal axis measures governments spending as share of GDP. We can see that there is a strong positive correlation: high-income countries tend to have larger government expenditures as a share of their GDP.
And this is also true within world regions represented here with different colors. This correlation reflects the fact that high-income countries tend to have more capacity to extract revenues, which in turn is due to their capacity to implement efficient tax collection systems.
In our entry on Taxation we discuss the drivers of tax revenues in detail. The visualization shows the reduction of inequality that different OECD countries achieve through taxes and transfers. The estimates correspond to the percentage point reduction in inequality, as measured by changes in the Gini coefficients of income, before and after taxes and transfers. The IDD provides further details regarding how these estimates are constructed. The data shows that across the 35 countries covered, taxes and transfers lower income inequality by around one-third on average equivalent to around 0.
Generally speaking, countries that achieve the largest redistribution through taxes and transfers tend to be those with the lowest after-tax inequality. The main source of cross-country data on aggregate government expenditures is the IMF. According to the IMF, government expenditure is calculated as the sum of all cash payments for operating activities of the government in providing goods and services, including compensation of employees such as wages and salaries , interest and subsidies, grants, social benefits, and other expenses such as rents and dividends.
The most important limitation with the estimates produced by the IMF is that, despite their efforts to standardize data collection, many countries report misclassified, incomplete, and untimely statistics. The lack of consistent data on local government expenditures often makes cross-country comparisons difficult. Because of this, many studies rely on central government estimates, even though these estimates provide an incomplete picture, especially in federal countries.
Because budgetary accounts may not include all central government units such as social security funds , they usually provide an incomplete picture. The chart provides a comparison of two cross-country measures of government expenditure.
The first measure, in the horizontal axis, corresponds to the World Development Indicators, and as mentioned above, corresponds mainly to central government spending. The second measure, in the vertical axis, corresponds to the depurated estimates from Mauro et al. As we can see, while the two measures are correlated, they are still substantially different. A big part of the difference between these two measures can be attributed to the fact that one of them accounts only for central government expenditures — indeed, most countries lie above a line with slope one, which suggests that local government expenditure is not negligible.
There remains a few countries where there is significant mismatch between total and central government spending- in the case of Costa Rica and Afghanistan, central spending appears to exceed total government spending. Social Security alone comprises more than a third of mandatory spending and around 23 percent of the total federal budget. Medicare makes up an additional 23 percent of mandatory spending and 15 percent of the total federal budget.
Finally, putting together discretionary spending , mandatory spending , and interest on the debt , you can see how the total federal budget is divided into different categories of spending. When the federal government spends money on mandatory and discretionary programs, the U. Treasury writes a check to pay the program costs.
But there is another type of federal spending that operates a little differently. Lawmakers have written hundreds of tax breaks into the federal tax code - for instance, special low tax rates on capital gains, and a deduction for home mortgage interest - in order to promote certain activities they deem beneficial to society.
In fact, tax breaks function as a type of government spending, and they are officially called "tax expenditures" within the federal government. When the government issues a tax break, it chooses to give up tax revenue for a specific purpose - so both spending and tax breaks mean less money in the U.
Treasury, and both reflect spending priorities laid out by Congress in various pieces of legislation. Unlike discretionary spending , which must be approved by lawmakers each year during the appropriations process , tax breaks do not require annual approval. Once written into the tax code, they remain on the books until lawmakers modify them. That means that even when tax breaks fall short of, or outlive their original purpose intended by Congress, they frequently stay on the books.
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