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FEDERAL FINANCIAL
SUPPORT OF BUSINESS

The Congress of the United States
Congressional Budget Office

 NOTES

Unless otherwise indicated, all years referred to in this study are fiscal years.

Numbers in the text and tables may not add to totals because of rounding.
 
Preface
The federal government supports private business activities through a variety of direct spending programs, credit subsidies, and tax incentives. The ongoing debate about the appropriate federal role in supporting business is hampered by the lack of data and analysis of current federal policies. A previous Congressional Budget Office (CBO) study in this area, Federal Support of U.S. Business, is now more than 10 years old and has been rendered obsolete by major legislation and the passage of time. At the request of the former Chairman of the Senate Committee on the Budget, Chairman Sasser, CBO has updated that earlier report. In keeping with CBO's mandate to provide nonpartisan analysis, this study makes no recommendations.

Philip Webre of CBO's Natural Resources and Commerce Division wrote the report under the supervision of Jan Paul Acton and Elliot Schwartz. The Natural and Physical Resources Cost Estimating Unit and the Tax Analysis Division made substantial contributions in both estimates and content. The author also appreciates the comments of George Eads, Robert Hartman, Rosemary Marcuss, William Randolph, Pearl Richardson, Frank Sammartino, and Aaron Zeisler.

Sherry Snyder edited the manuscript, and Christian Spoor provided editorial assistance. Donna Wood, Marlies Dunson, and William Boswell typed the many drafts. Kathryn Quattrone prepared the study for publication.

June E. O'Neill
Director
July 1995
Contents

SUMMARY

ONE  - INTRODUCTION
Determining What Constitutes Business Support
Business Support Versus "Corporate Welfare"
 

TWO -  ISSUES IN DEFININGAND MEASURING FEDERAL SUPPORT OF BUSINESS
Spending Programs
Credit Programs
Tax Expenditures
Federal Activities That Are Not Counted asBusiness Support

THREE  -  FEDERAL ACTIVITIES THAT SUPPORT BUSINESS
Tax Expenditures
Spending Programs
Credit Programs

FOUR  -  DISTRIBUTION OF FEDERAL SUPPORT AMONG BUSINESS SECTORS
Support Targeted Toward a Specific BusinessSector
Tax Expenditures That Benefit More ThanOne Sector
Targeted Support in Its Industrial Context
Effects of Tax Support on Investment byBusinesses
Technology Programs
 
APPENDIXES
 
A Estimated Tax Expenditures That Support Business
B Estimated Program Outlays ThatSupport Business
C Estimated Credit Activity and Outlays That Support Business

TABLES
 
S-1. Selected Federal Tax Expenditures That Support Business, 1995
S-2. Federal Expenditures and Credit Activity That Support Business, 1995
1. Federal Expenditures and Credit Activity That Support Business, 1995-1999
2. Selected Federal Tax Expenditures That Support Business, 1995-1999
3. Selected Federal Spending Programs That Support Business, 1984 and 1995
4. Selected Federal Credit Programs That Support Business, 1984 and 1995
5. Targeted Federal Support for Agriculture
6. Targeted Federal Support for Manufacturing
7. Targeted Federal Support for Mining
8. Targeted Federal Support for Utilities and Sanitary Services
9. Targeted Federal Support for Transportation
10. Targeted Federal Support for Finance, Insurance, and Real Estate
11. Illustrative Allocation of Multisector Tax Expenditures by Sector
12. Federal Business Support in an Industrial Context
13. Marginal Effective Corporate Tax Rates by Type of Asset
14. Marginal Effective Corporate Tax Rates by Sector
15. Federal Outlays for Technology Commercialization Programs in 1995 by Budget Function
A-1. Estimated Tax Expenditures by Budget Function
B-1. Estimated Outlays for Spending Programs by Budget Function
C-1. Estimated Obligations, Commitments, and Outlays for Credit Programs by Budget Function

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