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233 IRET Congressional Advisory 1 (2007)

handle is hein.taxfoundation/iretcgadv0230 and id is 1 raw text is: INSTITUTE FOR RESEARCH ON THE ECONOMICS OF TAXATION IRET is a non-profit 501 (c)(3) economic policy research and educational organization devoted to informing the public about policies thait will promote growth and efficient operation of the market economy. December 5, 2007 Advisory No. 233 TAXPAYERS THREATENED BY PROPOSAL TO SUBJECT TAX EXPENDITURES TO PERFORMANCE BUDGETING The House Budget Committee recently convened a hearing on performance budgeting. Performance budgeting refers to efforts to compare the amounts spent on government programs with the programs' goals and measured results. At the hearing, Chairman John Spratt (D-SC) provided a good summary of why performance budgeting, if properly implemented, is desirable, Given the daunting challenges that face us budgetarily, we need more than ever to put the taxpayer dollars to the wisest possible use.'1 Performance budgeting, with its emphasis on identifying government programs' goals and assessing their results, is not a new concept. However, many earlier efforts to implement it, such as the Planning, Programming, and Budgeting System (PPBS) in the 1960s, Management by Objectives in the early 1970s, Zero-Based Budgeting (ZZB) in the later 1970s, and Reinventing Government in the 1990s, had little impact, notwithstanding the claims of some supporters that they would transform government. Currently, the Government Performance and Results Act of 1993 (GPRA) requires government agencies to develop performance plans and report their results yearly, with the hope that the information will be useful to managers within the agencies and will assist the legislative and executive branches in assessing government spending programs.2 In addition, the Bush Administration has developed its own Program Assessment Rating Tool (PART), which attempts to systematically and consistently grade each government program based on its purpose, planning, management, and results.' A study by the U.S. General Accounting Office (GAO) in 2004 found that the Administration's assessment tool is beneficial, although the GAO saw room for improvement.4 Realistically, performance budgeting has the potential to slightly sharpen the focus of government programs and make them somewhat more results oriented, but it is unlikely to transform government. Two general obstacles are that the incentives within government are often unrelated to programs' effectiveness and that legislators and Presidents often pay scant attention to effectiveness when pushing for programs they want. In addition, performance budgeting is not good at evaluating the basic questions of whether a particular program is a legitimate function of government, whether the government can carry out the activity better than the private sector, and whether the payments made by the program and the taxes financing the program create perverse incentives that hurt the economy. Further, measuring results is often difficult. These problems are noted not to deny that performance budgeting has value - it is a highly desirable effort to combat waste, fraud, and abuse in government - but to caution against its potential benefits being oversold. A proposal to conduct reviews of taxes not levied as though they were spending programs. Chairman Spratt said at the start of the Budget Committee hearing, Our question today is whether or not there are ways that we can improve the tools we use to measure government performance and e~sm Al A * * gg~ a ~gg

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