TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Wednesday, August 21, 2013

IRS Spending, 1970-2013

Cato Institute, Downsizing the Federal Government:

IRS Spending

Update from the Cato Institute:

They raise good questions Paul. Here’s the answer:

According to official budget scorekeeping, the outlays from the refundable credits are part of the “IRS budget.” However, I split out IRS administration from the credits in this recent blog.

The Cato chart program simply grabs data for all federal agencies from the OMB’s main spending database, which is available here. The only thing we do is convert the nominal dollars to constant dollars (using an OMB deflator) to remove the effects of inflation.

You can clearly see that refundable credits are part of the IRS budget in this table from the most recent federal budget. (Go to the Treasury, and then scroll down until you find the IRS).

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The IRS budget in FY 2012 was about $12 billion. Will someone explain to me how that number can be found on this chart? Perhaps it uses a Canadian definition of billion.

Posted by: Bob | Aug 21, 2013 5:31:21 AM

According to the above chart produced from Cato Institute' web site total IRS outlays appear to be about $115 billion in 2012. The actual IRS budget for that year was $12.1 billion (see Perhaps Cato is using the wrong inflation factor?

Posted by: Kim Bloomquist | Aug 21, 2013 5:39:28 AM

I found an online GAO report from 1986 that says the IRS budget then was about $3.3 billion. The BLS online calculator says that's about $7 billion in 2013 dollars. Can't place that on CATO's graph, either. Let me guess, it's August -- was this an intern assignment?

Posted by: Bob | Aug 21, 2013 6:45:44 AM

So here's the story. That's not the IRS budget. That's the refundable tax credit budget. The CATO propagandists would like you to think they are connected. The source apparently is a May 14, 2013 post at

"Using data from the OMB budget database, I split total IRS outlays into two broad activities: administration and handouts. Administration includes tax return processing, investigations, enforcement, and other bureaucratic functions. Handouts mainly includes spending on “refundable” tax credits such as the EITC.

"The chart shows that the IRS has become a huge social welfare agency in recent decades. Handouts have soared from $4.4 billion in 1990 to an estimated $91.1 billion in 2013 (red line). Handouts are down a bit in recent years because some of the refundable credits from “stimulus” legislation have expired. IRS administration costs have grown from $7.7 billion in 1990 to an estimated $15.3 billion in 2013 (blue line). "

Posted by: Bob | Aug 21, 2013 7:14:44 AM

On the chart, the y-axis is expressed in terms of "Billions of 2013 Constant Dollars." The graph shows approximate 2013 outlays for the IRS of "105,000." So that would be 105,000 "Billions of 2013 Constant Dollars," or $105,000,000,000,000. In other words, according to the Cato Institute, the IRS outlays for 2013 were $105 quadrillion. I have always thought the folks at the Cato Institute were a tad confused on their basic math. Now I know.

Posted by: Publius Novus | Aug 21, 2013 7:34:07 AM

This is so obviously wrong, but no wonder libertiarians and conservatives think government spending is taking off like a rocket, they just make up numbers and charts showing whatever. This chart is so wrong I expect Mr. Caron to take it down and apologize for the error. Or at least explain how wrong it is.

Posted by: Doug Bates | Aug 21, 2013 7:36:04 AM